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NEAR-TERM MARKET FUNDAMENTALS: Wheat saw a rollercoaster day in futures yesterday. Light fund buying sparked a modest rally into early mid session, but this was followed by a late sharp sell off. Traders said that selling came from lower equity and crude oil markets as well as substantial fund selling. Trend-following funds have been aggressive short sellers again recently in wheat which one analyst describes as a renewed commitment to the large net short position they have maintained in recent months. Spreaders were also heavy sellers in wheat versus corn yesterday as that spread saw a reversal of the recent sharp gains made by wheat. Large wheat supplies in the US and elsewhere and generally positive growing conditions for winter wheat in the Northern Hemisphere are adding to the pressure in world wheat markets according to traders, along with the fact that US wheat continues to be the most expensive wheat in many markets. Added evidence of this comes from reports that Indonesia is likely to continue buying wheat from the distant Black Sea region. However, traders report that Australian wheat may be sold out through September. The US will issue its latest Supply/Demand Report tomorrow, and traders are looking for a small drop in 2008/09 ending stocks after the large increase in All Wheat ending stocks seen on the March S&D Report.

CASH NEWS AND TENDERS: Jordan is tendering for 100,000 tonnes of wheat. The United Arab Emirates is tendering for 40,000 tonnes of milling wheat from optional origins. Iraq is tendering to buy at least 50,000 tonnes of wheat.

WEATHER: Winter wheat weather is generally favorable in the US with milder temperatures forecast in the Plains later this week. Welcome dryness is forecast in the northern Plains through Saturday with scattered showers forecast to the south.

TODAY’S GUIDANCE: A hard break late in the day yesterday was a strong signal that large specs remain committed to the short side in wheat. Trend-following funds made a push to increase their large net short position on the last Commitments of Traders Report, and they will not give up on this direction just yet. We think that large specs will soon regret their commitment to the short side, but not before we test support as low as 535 to 540 in the July contract. First support is near 538 1/2. First resistance is near 558 with the major resistance near 575.

This content originated from – The Hightower Report.