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NEAR-TERM MARKET FUNDAMENTALS: Wheat opened higher yesterday along with corn and soybeans, but the wheat market quickly sold off to substantially lower levels despite continued strength in soybeans. Traders said that some of the weakness in wheat came on selling by spreaders who were unwinding long positions versus short positions in corn and soybeans. Funds were sellers early in the day, contributing to the weakness. Also contributing to the weakness was an improved weather forecast for winter wheat in the US. India’s farm commissioner said yesterday that wheat production there is likely to be around last year’s level of 78.4 million tons. This is in contrast to recent government expectations that output would exceed last year’s level. The moderate shift was credited to warmer weather during the second half of December. The US agricultural attache in Canada reports that wheat exports are expected to increase by 10% in 2008/09 from last year. The attache in Australia left its wheat estimate unchanged at 20.15 million tonnes, about in line with the latest USDA estimate. They added that small pockets of wheat remain to be harvested. The USDA will issue its latest Export Sales Report today. Syria rejected the latest offers in its tender for 200,000 tonnes of wheat. Tunisia is tendering for 50,000 tonnes of soft wheat.
CASH NEWS AND TENDERS: Pakistan bought 172,000 tonnes of wheat. It still has a separate tender for 250,000 tonnes that has been delayed on three occasions. Iraq has a new tender to buy 50,000 tonnes of wheat and Bangladesh has issued a new tender for 70,000 tonnes. Bangladesh is already in the market for 100,000 tonnes of wheat. Syria is tendering for 200,000 tonnes of wheat after passing on that same amount two weeks ago.
WEATHER: Weather remains mostly dry in the southern Plains into the early weekend with more rains still expected on Sunday and perhaps into next week.
TODAY’S GUIDANCE: The fact that prices moved higher overnight suggests that specs are no longer short in wheat and that it will take farmer selling or selling by funds to take the market lower. Any one of these factors could kick in at any time, but for now, a brief flurry of short covering may be in order. We pushed down through the support at 540 in March wheat yesterday which suggests that we will eventually get down to the next support at 528 to 530.
