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NEAR-TERM MARKET FUNDAMENTALS: Traders indicate that the wheat market is following strength in equities markets this morning along with short covering strength in soybeans that was generated by less widespread than expected rains in Argentina. Activity in the wheat export market remains fair to good with Egypt buying a total of 240,000 tonnes of Russian wheat on their latest tender. This included a transfer of 60,000 tonnes from private Egyptian traders. Traders say that the US again got none of the Egyptian business due in part to the recent surge in ocean freight rates. The Export Sales Report was out on Friday last week, one day late due to the holiday on Monday, and overall wheat sales were somewhat above trade expectations. Net sales came in at 433,500 tonnes, all for the current marketing year. Cumulative sales are still running above average at 86.4% of the USDA forecast for 2008/2009 versus a 5 year average of 84.6%. Officials in China repeated on Friday that recent rains have greatly alleviated recent drought conditions for their winter wheat crop. However, in the US, conditions remain very dry in the southern Plains and forecasts call for this to continue. US winter wheat comes out of the dormancy starting in March in the southern Plains. This is a period when the crop’s moisture needs increase sharply. The fact that this area has been extremely dry in recent months simply increases those moisture needs next month and into April in the Texas Panhandle and adjacent areas. The Commitments of Traders Report for the week ending 2/17 showed substantial net selling by funds. Index funds were net sellers of 2,799 contracts. Trend following funds were net sellers of 4,089 to continue to increase their net short position to 34,339. This is now approaching the late 2008 high in the net short position held by trend following funds. That total was near 40,000 contracts. It shrank in conjunction with the December-January rally. Indian officials repeated late last week that their winter wheat crop is in good condition. They continue to estimate 2008-09 output at 77.8 million tonnes. This is down 1% from the bumper crop in 2007-08.
CASH NEWS AND TENDERS: Egypt bought 240,000 tonnes of Russian wheat on a tender for 30,000 to 60,000 tonnes. Syria is in the market for 200,000 tonnes of soft wheat. Lebanon is tendering for 25,000 tonnes of wheat. Bangladesh is in the market for a total of 170,000 tonnes on two tenders.
WEATHER: Snow hit the northern Midwest over the weekend along with parts of the central Midwest. Mild temperatures are pushing into the southern Plains to start the week and this weather should push on through to the SW and parts of the central Midwest by mid week.
TODAY’S GUIDANCE: Wheat is benefiting from overnight strength in equities and short covering in corn and soybeans. However, it is likely to be a follower on rallies since wheat is highly susceptible to a sell off any time the dollar moves higher. Weather is mostly a non-event in this market although traders need to keep a sharp eye on dryness in the southern US Plains.
