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NEAR-TERM MARKET FUNDAMENTALS: The wheat market saw a seesaw battle yesterday. This resulted in an early burst of buying that took the December contract to a 2-week high. This followed by new highs for the day late in the day session, but a late sell off trimmed the gains substantially. One trader said that this “curbed the enthusiasm” of many bulls who are now expected to wait for a signal from the dollar or export sales before they resume their buying. They will need to wait an extra day to see the USDA’s latest export sales totals which will be released on Friday morning this week, one day late due to the Veteran’s Day holiday. Weaker overnight price action in wheat reflected the slowing of the down trend in the dollar which had that index up overnight. Egypt is in the market for 55,000 to 60,000 tonnes of wheat this morning. US wheat may have a hard time being competitive with wheat from France and the Black Sea region in this tender. The toughness of this competition was highlighted this week by the USDA’s increases in production for all of the major producers from the former Soviet Union. Basis levels for soft red wheat at the Gulf have steadily improved since early August with a minor burst to the upside seen in late October and again in early November. China’s government think tank, CNGOIC, left its estimate of their 2009 wheat crop unchanged yesterday at 114.95 million tonnes. This was up from 112.46 in 2008.
TODAY’S GUIDANCE: Wheat staged an apparent breakout rally early in the day yesterday, but pulled back into the close and overnight. This would seem to indicate that the rally was another burst of ‘catch up’ short covering in wheat that will go nowhere in the long run. Look for a modest setback into the end of the week. First support in March wheat starts at 541 and then at 530 3/4 and then 522. A push below 517 would likely attract enough selling to push the December contract down near 480 to 490. First resistance remains near 560 and then near 584 3/4 to 590.
