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NEAR-TERM MARKET FUNDAMENTALS: Traders report that the wheat market may have hit the “pause” button this week. This came after the market finally appeared to run out of sellers and the price of US wheat finally became competitive on the world market. Evening up ahead of this morning’s USDA supply/demand and crop production reports has also been a major feature since mid week according to traders. Overseas weather is increasingly in the news with the wheat crop in Saskatchewan continuing to improve on warmer temperatures and good moisture even though the wheat crop is still running late there. Favorable conditions in Australia’s eastern wheat belt state of New South Wales have resulted in wheat plantings of 3.2 million hectares which is up 6.3% from the area harvested last year. After much of Australia saw drought last year, much of New South Wales has seen above normal rains to start the new crop year. In Ukraine, the wheat harvest to date stands at 2.1 million tons on 845,000 hectares. This is 12% of the planted area. El Nino is in the news with the National Oceanic and Atmospheric Administration in the US indicating that a weak to moderate El Nino is now underway. They add that this should not have a significant effect except for the Southern Hemisphere, especially in Australia and Argentina. Export sales were strong yesterday, with this week’s total exceeding the average needed to reach the USDA projection for the first time so far in the 2009/10 crop year. However, soft red sales remained light at just 32,900 tonnes. Total net sales for wheat were 584,200 tonnes. As of July 2, cumulative wheat sales stand at just 20.2% of the USDA forecast for 2009/2010 versus a 5 year average of 26.3%. Sales need to average 410,000 tonnes each week to reach the USDA forecast. Deliveries against the July contract today were 1,243 contracts with a total to-date at 32,026.
WEATHER: Forecasts continue to call for 90 degree temperatures in the Delta, the southern Plains and the SW and south central Midwest. Severe heat is situated in the extreme southern Plains. Rain is expected in Nebraska and parts of Kansas today as well as Iowa, southern Wisconsin and eastern Illinois. Moderate temperatures and scattered rains are expected in most corn and soybean growing areas through much of next week with the exception of the Delta which is expected to remain hot. The 6-10 day calls for normal to below normal temperatures for most of the Midwest and northern Plains. The southern Plains and the Delta are expected to remain above normal. The 6-10 day calls for precipitation to be normal to above normal in the Midwest and in the central and northern Plains. Areas to the south are looking for below normal rainfall.
TODAY’S GUIDANCE: While wheat showed us this week that it was due for some short covering, the bears are not going to give up so easily. A higher dollar cooled off the action overnight despite strong export sales yesterday. We suspect that this means that the market will only continue to rally if it can maintain its recent improvement in terms of price competitiveness on the world market. That will only happen if we have a stable to lower dollar. That said, we are still looking for more sideways to higher price action during July. First support in the December contract remains above 535. Weak resistance is at 556 1/4 and then at 563 and at 575.
TODAY’S MARKET IDEAS: Today’s production report will increase supply to reflect the June 30th acreage report. We would not rule out a minor new low following the report, but that looks like another buying opportunity.
