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NEAR-TERM MARKET FUNDAMENTALS: Higher than expected yields for the ongoing harvest, improving weather for Europe and expectations that Russia and Ukraine will be aggressive sellers of wheat on the world market for the new crop season are all seen as short-term negative forces. The market gave back all of yesterday’s gains with increased selling pressures overnight as the strong US dollar and another sharp break in European milling wheat helped to pressure. Before the Russia drought last year, nearby wheat was trading near 450 and while the market has already dropped from over 825 late last month, traders do not see 670 wheat as “cheap” and this is keeping commercial traders as more active sellers. July wheat closed moderately higher on the session yesterday and managed a late new high for the day despite a sell-off in Kansas City and Minneapolis wheat into the close. July KC wheat pushed to a new low for the move this morning to 788 3/4 as compared with yesterday’s high of 814. The sharp break in the US dollar and strength in the other grain markets helped to support the market early. Ideas that the harvest pressures will continue ahead with Kansas just 27% harvested helped to limit the advance and there is still talk of better than expected yields. Talk of heat for the northern plains for early July was seen as a mixed issue for recently planted spring wheat crops as the crops have seen a steady dose of rain which left to crop only 91% planted as of Sunday vs. the 10-year average of 100% complete. The crop is rated 72% good to excellent condition. Talk of the oversold condition of the market and ideas that wheat feeding will boost global usage this year helped provide some support yesterday. Better weather in Europe has been a factor to limit the advance. The head of the weather forecasting center in Ukraine believes the grain harvest this year is set to rise to 42.5-44.5 million tonnes as compared with 39.2 million last year. Wheat exports from Ukraine for the 2010/11 season (which ends June 30th) are expected near 3.7 million tonnes from 9.2 million the previous year. European milling wheat futures pushed to a new six-week low this morning as better weather and speculative long liquidation selling helped pressure. G-20 Agriculture ministers are meeting in Paris and discussing proposals from France to tackle the surge in global food prices. Ideas range from data base sharing to increased regulation of commodity trading. Tunisia is tendering to buy 75,000 tonnes of optional origin wheat.
TODAY’S GUIDANCE: While oversold and in a position to see increased feeding usage, traders see the lack of a serious weather issue in Europe as a key and this has helped keep fund traders as active sellers.
TODAY’S MARKET IDEAS: Short-term support for September wheat is at 691 and then 681 3/4 but the technical action is bearish. However, futures are oversold and July wheat has already reached the some initial downside objectives. Bears might be cautious given the potential production issues for the northern plains and Canada.
Wheat: Oversold but No European Weather Threat
by Terry Roggensack on June 22, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
NEAR-TERM MARKET FUNDAMENTALS: Higher than expected yields for the ongoing harvest, improving weather for Europe and expectations that Russia and Ukraine will be aggressive sellers of wheat on the world market for the new crop season are all seen as short-term negative forces. The market gave back all of yesterday’s gains with increased selling pressures overnight as the strong US dollar and another sharp break in European milling wheat helped to pressure. Before the Russia drought last year, nearby wheat was trading near 450 and while the market has already dropped from over 825 late last month, traders do not see 670 wheat as “cheap” and this is keeping commercial traders as more active sellers. July wheat closed moderately higher on the session yesterday and managed a late new high for the day despite a sell-off in Kansas City and Minneapolis wheat into the close. July KC wheat pushed to a new low for the move this morning to 788 3/4 as compared with yesterday’s high of 814. The sharp break in the US dollar and strength in the other grain markets helped to support the market early. Ideas that the harvest pressures will continue ahead with Kansas just 27% harvested helped to limit the advance and there is still talk of better than expected yields. Talk of heat for the northern plains for early July was seen as a mixed issue for recently planted spring wheat crops as the crops have seen a steady dose of rain which left to crop only 91% planted as of Sunday vs. the 10-year average of 100% complete. The crop is rated 72% good to excellent condition. Talk of the oversold condition of the market and ideas that wheat feeding will boost global usage this year helped provide some support yesterday. Better weather in Europe has been a factor to limit the advance. The head of the weather forecasting center in Ukraine believes the grain harvest this year is set to rise to 42.5-44.5 million tonnes as compared with 39.2 million last year. Wheat exports from Ukraine for the 2010/11 season (which ends June 30th) are expected near 3.7 million tonnes from 9.2 million the previous year. European milling wheat futures pushed to a new six-week low this morning as better weather and speculative long liquidation selling helped pressure. G-20 Agriculture ministers are meeting in Paris and discussing proposals from France to tackle the surge in global food prices. Ideas range from data base sharing to increased regulation of commodity trading. Tunisia is tendering to buy 75,000 tonnes of optional origin wheat.
TODAY’S GUIDANCE: While oversold and in a position to see increased feeding usage, traders see the lack of a serious weather issue in Europe as a key and this has helped keep fund traders as active sellers.
TODAY’S MARKET IDEAS: Short-term support for September wheat is at 691 and then 681 3/4 but the technical action is bearish. However, futures are oversold and July wheat has already reached the some initial downside objectives. Bears might be cautious given the potential production issues for the northern plains and Canada.
Tags: Grains, Wheat
About Terry Roggensack