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NEAR-TERM MARKET FUNDAMENTALS: March wheat rallied to its highest levels since December 8th yesterday and then retreated somewhat overnight in the face of a stronger dollar. Wheat demand continues to lag rallies in corn and soybeans. This comes at a time when there are finally signs of improvement in corn demand on the export front, while wheat demand may be easing. Funds were buyers yesterday in wheat and traders are looking for fund buying to continue into January. This week’s export inspections for wheat were below trade expectations at just 13.035 million bushels. This was in line with last week’s total, but it falls short of the average pace of 17 million bushels that are needed each week to reach the USDA’s export projection for 2009/10. Total inspections to-date stand at 51.9% of the USDA’s projection versus a 5-year average of 56.6%. Japan is looking to buy 126,000 tonnes of wheat on its regular tender this week. Forecasts call for mostly dry conditions across the Plains and the Midwest over the next 5 days. Temperatures are expected to be below normal in these areas over that period although the southern Plains may warm to near normal or above normal temperatures later in the week. Argentina is expected to be mostly dry into mid week with a few scattered showers. This may be followed by more scattered showers and thunderstorms into the end of the week and then back to mostly dry on the weekend. The weekly Winter Wheat Conditions report showed 63% of the crop rated good/excellent compared to 63% last week. There is no comparison number for last year.
TODAY’S GUIDANCE: The price advance in wheat yesterday left the March contract in a narrow range near the lows of the past month. This lack of a recovery in prices in comparison to corn and soybeans mirrors the lack of recovery in export demand. This has some traders and analysts already talking about the need to revise US wheat exports lower on upcoming supply/demand reports. Fund buying may continue into January, but a further rally in the dollar would certainly temper this and a rally in wheat futures is likely to attract a surge of selling by producers in the US, especially in soft red wheat. First support remains at 530 1/4 in March wheat with further light support near 525 to 528. Next support remains near 517 1/4. First resistance remains at 547 1/2 to 548 and then at 552 and 562 1/2 to near 565.
