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Continued concerns for winterkill damage for areas of the central plains which do not have snow cover helped support the market yesterday and again overnight. Damage is possible when soil temperatures at the crown get down to 10-12 degrees according to Kansas State agronomists. The sharp drop in the dollar is also providing a more direct benefit to wheat than other grains. This is due to the strong export calendar for wheat and the fact that US wheat has been priced out of most export transactions recently. The Food and Agriculture Organization of the UN (FAO) issued its latest world wheat estimate for 2008/09 at 682 million tonnes. This puts it slightly behind the latest USDA estimate at nearly 684 million tonnes. They added a projected 3-4% drop in planted area for the US and Europe during 2009/10. Some snow is also expected in the Plains along with rain south and this is expected to benefit some areas that were getting dry in the SW and other areas in the Upper Midwest that needed snow cover.
CASH NEWS AND TENDERS: Japan bought 62,000 tonnes of wheat on its latest weekly tender. Jordan bought 50,000 tonnes of Russian wheat. Pakistan is tendering for 500,000 tonnes of optional origin wheat with a bidding deadline of December 20. Morocco is tendering for 300,000 tonnes of soft red wheat. Jordan is tendering for 100,000 tonnes of optional origin wheat for delivery in March. Bangladesh is tendering for 100,000 tonnes of wheat with a closing date of December 15th.
WEATHER: The central US looking for heavy snows across a broad swath of the Upper Midwest with rains south. Precipitation is also expected in the Plains with some snow north and rain south.
TODAY”S GUIDANCE: Wheat remains the leader among the grains and another new high for the move overnight raises the potential for a take-off rally. This could be supported by trend-following funds which are heavily short as well by buying interest from investors who are fleeing the dollar. These investors will be looking for a commodity market where demand is stable regardless of price. However, the market will need to take-off soon. If it does not, we are overdue for a correction since we have taken out the previous session’s highs for 9 straight days.
