NEAR-TERM MARKET FUNDAMENTALS: Wheat moved moderately higher overnight in conjunction with a significant further advance in soybeans and a similarly modest advance in corn. This comes in the face of an advancing harvest under mostly good conditions across the Northern Hemisphere. The main concern remains the lateness of the crop in the US and Canada although there is still no forecast of a major frost. India’s Farm Minister said late last week that India is aiming to increase winter grain output this year due to the drop in summer monsoon rains. This will include a program to ensure the timely sowing of wheat which can compensate to some degree for expected tightness in rice supplies. In Australia, rains boosted the already favorable crop conditions in SW and SE growing areas, but the NE wheat belt remains dry. Further dryness could begin to stress the crop there but, for now, most crop forecasters are calling for a good crop of about 22 to 23 million tonnes which is about in line with last year’s production. The Commitments of Traders Report for the week ending August 18th showed mixed activity by funds in wheat. Index funds were net buyers of 5,034 contracts despite renewed worries that the CFTC may force liquidation some of their very large long position. As of last week, index funds held nearly 47% of the total net long position in Chicago wheat which compares to about 29% each in corn and soybeans. Activity by trend-following funds continues to be at an opposite extreme from the index funds. Trend followers were net sellers of 3,440 contracts to extend their net short position to a new record large at 57,636 contracts. An Israeli firm is tendering for 25,000 tonnes of feed wheat. This is likely to be from Europe.
CASH NEWS AND TENDERS: An Israeli firm is tendering for 25,000 tonnes of feed wheat.
WEATHER: The northern Plains should see warmer weather with showers this week. This may be followed by intermittent cooling into the end of next week. A shower system moved along the US/Canada border overnight. Weather in the Black Sea region has been mainly favorable over the past week with rains in Russia aiding in late development and dry weather in Ukraine aiding in the harvest. In Australia, beneficial rains fell along the southern tier of the country, aiding the wheat crop in both western and eastern growing areas. However, dryness continues to persist in the NE.
TODAY’S GUIDANCE: The wheat market is trying to decide whether to continue pushing lower or whether it should participate in the short covering rallies now underway in soybeans and corn. We still look for the downtrend to continue with a possible short term acceleration to the downside. However, if that does not happen today, or at the latest by tomorrow, traders should consider covering shorts. First support in the December contract remains near 483. Resistance remains at 508 to 510.