NEAR-TERM MARKET FUNDAMENTALS: The USDA’s acreage report was considered bearish for wheat yesterday with the stocks report considered neutral. This combined with very bearish acreage and stocks numbers in corn to send the wheat market sharply lower yesterday, with the December contract easily taking out the March lows in the process. However, prices recovered later in the session yesterday and the rebound continued overnight with some traders saying that this may be a signal that the wheat market is finally running out of sellers. Harvesting continues at a good pace although rain may cause some minor interruptions in both hard and soft red areas today and again on Friday, Saturday and Sunday. Cash market sources say that this is not a major issue. On yesterday’s reports, the USDA pegged All Wheat acreage at 59.775 million acres, about 1.5 million acres above trade expectations of just over 58.2 million. Spring wheat acreage was also a bearish surprise at 13.772 million acres versus 13.304 million in March. Traders had been looking for a decline of about 200,000 acres for spring wheat, so this was 700,000 acres more than expected. Quarterly wheat stocks were about in line with expectations at 667 million bushels. That number now becomes the ending stocks figure for the just-ended 2008/09 wheat crop year. Deliveries against the July wheat contract today were heavy again at 5,312 contracts. This puts the 2-day delivery total at 11,346 contracts.
WEATHER: Dry weather is expected to continue today in most of the Midwest with the exception of the NE corner. A band of rain is also expected from western North Dakota down through eastern Kansas and into northern Arkansas. The Midwest should ten remain mostly dry through early next week with the exception of some rain in the SW and south central Midwest on Friday, Saturday and Sunday. Temperatures are expected to be moderate in much of the Midwest through next week and hot in the southern and central Plains. This may shift to a generally hot pattern starting about ten days out with a hot air mass covering nearly all of the Midwest and Plains from 10 to 14 days out.
TODAY’S GUIDANCE: The wheat market was an innocent bystander to some extent yesterday. Still, wheat acreage was raised substantially versus trade expectations and that was genuinely bearish news. This pushed the December contract to well below the March lows. However, the fact that wheat pulled back above the March lows into the close and rallied further overnight suggests that this was a temporary blow off, and we may now end up trading between 550 on the low end and 600 to 612 on the high end over the intermediate term. First support in the December contract is in the area of 560 to 565. Next support is at 550. First resistance is at 579 1/2 with the next resistance at 596 to 600.
TODAY’S MARKET IDEAS: Yesterday’s action may have finally cleared out existing sell orders in wheat.