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NEAR-TERM MARKET FUNDAMENTALS: Wheat traded moderately lower overnight with traders crediting the weakness mainly to selling in soybeans and corn. Those markets were under pressure from favorable weather forecasts in the Midwest and weaker crude oil and equities. Weather is also expected to be favorable in the northern Plains of the US which is considered very favorable to the late developing spring wheat crop there. There is a possibility of cooler weather and some rain starting next week, however, there does not seem to be a serious threat of frost in the near term forecasts. One analyst pointed out that the greatest threat to the spring wheat crop at this point may be an extended period of rain, rather than an early frost, but current forecasts do not call for heavy rains. India is approaching its wheat planting season with sub-par moisture levels in a number of major wheat-growing areas from north central through extreme northern India. In Australia, private forecasters are still pegging the wheat crop at near 23 million tonnes despite concerns over El Nino. The CFTC left the format unchanged on its latest Commitments of Traders Report. It showed mixed activity by funds. Index funds were net buyers of 1,713 contracts while trend-followers were net sellers of 1,546. This pushed the trend followers’ net short position to a new record high of 59,182. Today is the First Notice Day for the September contract and wheat deliveries were higher than expected at 5,464 contracts.
WEATHER: Mostly warmer and dry weather is forecast calls for warmer and mostly dry weather in the northern Plains with the possibility of rain and cooler weather starting next week.
TODAY’S GUIDANCE: The COT report showed another increase in the record large net short position held by trend-following funds, and this suggest that it may get harder to find fresh sellers in coming weeks, unless farmers dump their crops or the dollar rallies. This does not indicate that the wheat market is ready to turn higher, just that it is not likely to have much momentum to the down side. Next support in the December is near 483 with 473 1/2 as next swing objective. First resistance is at 508 and then at 520 and 528.
