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NEAR-TERM MARKET FUNDAMENTALS: The wheat market lagged behind sharp rallies in corn and soybeans yesterday. However, wheat managed to rally from its early lows to finish only marginally lower yesterday, and this was followed by substantial gains in wheat in the overnight session. Funds were buyers in wheat yesterday, but to a lesser extent than was the case in corn. One analyst also noted that wheat has moved back above its 100-day moving average over the past two sessions, joining nearby soybean and corn contracts which are now trading well above their own 100-day moving averages. Planting progress is expected to advance in soft red wheat areas during this week’s extended dry spell, but some farmers are still waiting to harvest summer crops before getting around to wheat sowing. India reported yesterday that its production of food grains is down by 18% versus last year due to the lower-than-normal monsoon rains this summer. This mainly affected rice and corn. Ukraine reports that its wheat exports were 4.87 million tonnes during the first 4 months of the 2009/10 crop marketing year. This is up from 4.35 million tonnes the previous year, although October exports were slightly lower than last year. Ukraine, Russia and the EU have been strong competitors for US wheat in the big Mediterranean wheat market so far this year.
TODAY’S GUIDANCE: December wheat moved through the 100-day moving average yesterday and extended those gains overnight. With fund buying in evidence in many commodity markets, wheat may start doing what it did in the third week of October, namely, play catch-up with corn and soybeans. Yesterday’s pullback in the dollar after that market made big early gains should pave the way for further spec support in wheat and that should at least bring a test of 550 in the December contract. First support is near 508 to 510 in December wheat and then at 496 to 500. A break below 500 could result in a further slide down near 473 to 474, but that is not what we are expecting. First resistance is near 529 to 533 1/2 and then at 542 1/2.
