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NEAR-TERM MARKET FUNDAMENTALS: The wheat market has sagged since Tuesday and that continued with the start of the overnight session when prices pushed just below yesterday’s lows. This was followed by a modest recovery. Funds were sellers in wheat yesterday, but many traders and analysts are looking for funds to remain largely on the buy side into January on short covering by trend-following funds and rebalancing by index funds. A higher than expected estimate of the Canadian wheat crop yesterday morning got the market off to a soft start according to one trader. Statistics Canada pegged their all-wheat crop at 26.5 million tonnes, up 7.9% from their previous estimate. US export sales for wheat were in line with trade expectations yesterday. Net sales totaled 390,700 tonnes which pushed cumulative sales for the season to 62.1% of the USDA forecast versus a 5 year average of 70.2% for this time of the year. Sales need to average 338,000 tonnes each week to reach the USDA forecast. This is the 4th week in a row that net sales in wheat have been higher than the average needed to reach the USDA’s projection, and that runs counter to the trend over much of the crop year to date. Demand for Australian wheat has also been somewhat firm in recent days with reports that 150,000 tonnes have been sold into SE Asia over the past week and a half. Egypt bought 240,000 tonnes of wheat yesterday on its latest tender. Of that total, 180,000 tonnes were from Russia and 60,000 tonnes were from Germany. No wheat was bought from the US, as expected. The Buenos Aires Grains Exchange said yesterday that dry conditions in the SW Argentine wheat belt and parts of the western belt may cause some fields to remain unharvested this year. They are maintaining their production forecast at 7.5 million tonnes, but signaled that this total could well be lowered on subsequent weekly reports. Harvest has been underway in Argentina since late October and it will continue through the end of December. In contrast, the Government of India reports that this year’s wheat crop could exceed last year’s record total of 80.6 million tonnes. This comes on improved moisture levels and a faster planting pace than was seen last year. The planting season runs through the end of the month.
TODAY’S GUIDANCE: Today’s US unemployment number could have an effect on all markets if it surprises analysts and jumps by more than expected, or edges lower. However, these influences should be temporary in wheat. Improved export sales over the past month in the face of a stable dollar and uncompetitive US wheat prices shows that importers think that current prices are relatively attractive. The main question now is whether investors/funds are also interested in owning more wheat at current price levels. If there is no big news this morning, we may see some evening up ahead of the weekend. This will tell us if shorter term specs are leaning to the buy side or the sell side. All things considered, we are looking for some further erosion. First support has dropped to near 562 with the next support at 551 1/2 to 553 1/2. First resistance is at 580 with next resistance at 588 to 589 and then at 596 1/2 to 600.
