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NEAR-TERM MARKET FUNDAMENTALS: Traders say that the wheat market’s focus is shifting more and more to the dry conditions in the southern and south central Plains in the US. Forecasts remain dry for this region with the possibility of no rain in the lower plains through March 16th. This comes after Chinese officials said on Friday that the drought in the winter wheat belt there earlier in the growing season will have no appreciable effect on this year’s overall grain production. Export sources report that shippers are starting to work through the backlog of delays at ports in Western Australia with a major buyer in Indonesia expecting partial delivery on a long-delayed shipment soon. Some traders are also indicating a renewed concern over possible inflationary influences in key food markets, although The Commitments of Traders Report for the week ending March 3rd showed heavy net selling by funds. Index funds were net sellers of just 217 contracts, but trend-following funds were net sellers of 7,098 contracts which took their already large net short position to a record 44,338 contracts. Deliveries against the March contract today were 470 contracts, down substantially from the previous session with the total for the month at 18,463.
WEATHER: The US saw good rains over the weekend in the Great Lakes Region put persistent dryness in the south central and southern Plains. Some forecasts call for dryness to persist in the lower Plains through March 16th, although a cold is also expected to bring lower temperatures in the meantime.
TODAY’S GUIDANCE: Wheat saw strong gains late last week bolstered by fund buying and dry weather in the southern Plains. Both factors are still in play, but the Commitments of Traders Report showed that trend-following funds continued adding to their already record large net short position. Until that trend turns, funds will be on both sides of the wheat market. Shipping delays in Australia have also been somewhat supportive, but the continued strength in the dollar is a disappointment today as we start another week. This may mean that the initial burst of short-covering is over. Support today is near 521 1/2 in the May contract with the next support at 512. Resistance is at 548 and 556, but a push through those levels could carry to as high as 575 in May.
