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NEAR-TERM MARKET FUNDAMENTALS: Wheat is starting the week under pressure despite a modest break in the dollar this morning. Traders indicate that this comes on continued weak demand for US wheat on world export markets as well as reports that index funds switched to the sell side in agricultural commodities last week. This shift was most pronounced in Chicago wheat. However, while the Commitments of Traders Report for the week ending 5/12 showed substantial net selling by index funds, trend-followers were on the buy side by an even larger amount. Index funds were net sellers of 5,333 contracts while trend-followers were net buyers of 9,614 contracts. This reduced their net short position to just 19,912 contracts. The trend-followers had been short by over 44,000 contracts as recently as April. India’s trade Secretary said today that his country will begin allowing limited exports of wheat and wheat products soon. Pakistan also said today that it may allow exports of 500,000 tonnes of wheat. This follows the procurement of 8 million tonnes of wheat by the government of Pakistan, the highest total since 2002. Reports of possible exports by India and Pakistan have been in the market in recent weeks, so this is not a surprise. Egypt is testing a second shipment of Russian wheat this week for dead bugs and other impurities. Feed millers in the Philippines bought a total of 337,150 tonnes of feed wheat from Ukraine for June through August shipment. Ukraine says that its grain stocks as of May 1st were 10.7 million tons, up 25% from 2008. Of that total, 5.4 million tons were wheat. Drier and somewhat warmer weather is forecast this week in the Midwest and this will be welcome for the soft red wheat crop where traders have been increasingly concerned about the possibility of plant diseases due to wet conditions in recent weeks. Dryness in Argentina could cause further loss in planted area.

CASH NEWS AND TENDERS: Israel is tendering for 30,000 tonnes of wheat. Iraq and Jordan are tendering for wheat.

WEATHER: The latest rainy pattern exited the eastern Midwest on Sunday after dry weather started spreading into the corn and soybean belts from the NW along with the cold temperatures. This system produced frosts starting in the NW Midwest into Saturday morning, moving into the north central Midwest into Sunday morning and the parts of the extreme NE into this morning. Warmer temperatures are forecast by Tuesday with a significant push of warmer air by Wednesday. This is expected to last through Thursday, but some weather models switched over to a much wetter pattern for the Memorial Day weekend and into the last days of May. In addition, we may see a line of rain showers in The NW Midwest tomorrow and again on Thursday. A look at the 7-8 day record of rainfall shows substantial rains in SE Iowa, northern Missouri and much of Illinois and Indiana as well as southern Oklahoma and SW and southern Arkansas. Rains may push back and forth through the northern Plains from today through Thursday with mostly dry conditions expected in the southern Plains.

TODAY’S GUIDANCE: Wheat failed to take out the recent highs last Thursday, in part due to very poor export sales for soft red wheat last week. The July contract pushed below some moderate support on Friday and gained further downside momentum in the overnight session today. The fact that wheat has lagged behind corn and soybeans on the recent rally also lends weight to the bear case, as do signs that investors’ desire to buy commodities may be cooling. However, trend-followers are apparently in the mood to cover more of their large net short position and there is a broad band of chart support all the way down to near 515 in the July contract. First support is near 555 1/2 in the July contract this morning with the next support near 551. Resistance is near 579 and again at 591.

This content originated from – The Hightower Report.