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NEAR-TERM MARKET FUNDAMENTALS: The wheat market has followed corn and soybeans higher since the last half of yesterday’s session with good support coming from a lower dollar this morning according to traders. This follows the release of USDA crop reports yesterday that were considered slightly bearish for wheat on both the domestic and world fronts. Forecasters indicate that there may not be a killing frost in Canada or the northern US Plains late next week as was feared earlier this week. The weak monsoon rains in India are now primarily affecting rice-growing areas in the NE. While wheat is already harvested there and not directly affected by the poor monsoon rains, rice is a competing staple grain crop, and diminished output in rice could add to demand for wheat. Egypt’s state news agency announced yesterday that the country is banning both imports and exports of food that is not certified to be free of genetically modified products. Egypt is one of the world’s largest importers of soft wheat and the ban would include wheat. On yesterday’s reports, the USDA pegged 2009/10 ending US wheat stocks at 743 million bushels, up from July’s estimate of 706 million, but below trade expectations of about 750 million bushels. This is down from 667 million bushels last year and just 306 million for the 2007/08 season. All Wheat production was pegged at 2.184 billion bushels, up from 2.112 billion last month. Traders were looking for near 2.152 billion. Canadian wheat production was lowered to 22.5 million tonnes from 23.5 million and Argentina was lowered to 8.5 million from 9.5 million in July. Total world production was raised to 659.29 million tonnes from 656.48 in July. World ending stocks were raised to 183.5 million tonnes from 181.3 million last, 169.5 last year and 121.8 million two years ago.

WEATHER: US temperatures continue at normal to above normal levels in many growing areas with more dryness now expected late this week and into Sunday than had previously been forecast. The 6-10 day forecast now calls for below normal temperatures across most of the Midwest and the central and northern plains in the US with above normal precipitation across the southern Midwest, SE and much of the Delta. Fears of a frost in wheat-growing areas of Canada later next week appear to be ebbing. Concern over diminished monsoon rains in India now seem to be focusing on rice-growing areas in the NE of that country with soybeans areas mostly seeing adequate moisture.

TODAY’S GUIDANCE: The positive price reaction to yesterday’s somewhat negative report in wheat seems to be telling us that this news was already priced into the market. Is this enough to turn the wheat market higher? This is doubtful over the long term, particularly since forecasters now seem to be downgrading the potential for a killing frost in late August in Canada and/or the northern US plains. First support is near 512 1/2 in the December contract with next support near 495 to 503 1/2. First resistance is at 532 3/4.

TODAY’S MARKET IDEAS: Given the moves being made in outside markets, particularly the dollar, we would give the wheat market some room to rally over the short run.

This content originated from – The Hightower Report.