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NEAR-TERM MARKET FUNDAMENTALS: Traders indicate that wheat is playing catch up following the major advances seen over the past week in the corn and soybean markets. This brought a late firming trend to wheat in the overnight session that was also boosted by a late sell off in the dollar index. Increased demand for wheat on the international front is considered supportive, as is recent fund buying and light selling by farmers who are waiting to harvest summer crops and plant soft red winter wheat. One trader said that the fund buying and increased concern over inflation has muted concerns over the lack of demand for US wheat on recent tenders from the Middle East and North Africa. France unexpectedly lowered its estimate of this year’s wheat crop by 1 million tonnes yesterday, but supplies there are still ample and France is expected to take a substantial portion of upcoming North African buy orders. Japan is tendering for 132,000 tonnes of wheat on its regularly scheduled weekly tender. China issued its low-tariff wheat import quota for 2010 in accordance with commitments made to the World Trade Organization. The wheat quota was left unchanged at 9.64 million tonnes, although the USDA projects 2009/10 China wheat imports at just 0.30 million tonnes.
TODAY’S GUIDANCE: Bearish fundamentals and a lack of US participation in recent international wheat tenders do not appear to be enough to keep the December wheat contract below 500 over the long term. Large specs are still short in this market and users are looking to buy after the completion of the big harvests in the Northern Hemisphere. Given the sustained weakness of the dollar, it may take higher prices to bring more wheat to market at a time of stepped up demand. Corn and soybeans have already soared past their 100-day moving averages. This average is near 541 1/2 in the December contract this morning and it looks like wheat may be aiming for that level. First support is near 473 to 474 in December wheat with the next support at 467 1/4 to 468. First resistance is near 508 to 510 and then near 520. However, we could see a run to near 540.
TODAY’S MARKET IDEAS: The wheat market may have a bit more trouble moving through psychological barriers than soybeans or corn, and 500 is the next such barrier in December wheat. However, a pause below that level this week would likely be temporary.
