Wheat Commentary "Large world supplies keep buyers uninterested."

Monday, October 05, 2015

***** Fundamental Analysis: Even with the weather issues, ongoing talk of large world supplies is keeping a lid on buying interest.  But the weather threat to the crops in the Black Sea area, Australia, and parts of S. America start to dissipate, don’t look for the stronger market action to go away.  Over the weekend, there were reports of a frost as far north as Cordoba, Argentina that likely hurt their crop to some extent.  And ongoing rains in the southern parts of Brazil is impacting quality of their crop that’s being harvested.  Australian weather had not shifted much from the dry pattern that has dominated them for the last month.  There could be some limited showers in southern Russian and parts of Ukraine, but as a whole, the generally dry pattern is expected to persist, potentially leaving the new crop in poor shape going into dormancy.  Our winter wheat planting is reported to be 49% complete; the trade was looking for 47%.  Export inspections, 20.5 mln. bu., were about as expected.  But over the weekend, Egypt bought 235,000 tons of wheat, at the high end of recent buys, with prices 6% higher than a couple of weeks ago.  That hints they see downside risk becoming a little more remote.

***** Tech Comment: Last week, the strength in Chi. wheat futures may have finally built the case that a short term low has been seen.  Monday didn’t do much to enhance that, but the ability to hold the 10-day MA was a small positive.  The move over $5.17 opened the door to a challenge of resistance at $5.50, but it needs a close over $5.25 to key a stronger upside move.  Major long term support at $4.50-$4.60 has been confirmed.  From our perspective, it’s more a matter of how long it takes to get back to last summer’s peak, as well as last winter’s peak.  The short term 20-week cycle is still a little uncertain, but with time that picture will clarify itself. Minor support lies at $4.80-$4.90.  We’ll watch the action through the next few weeks to determine how the cycle count might unfold.  Even then, the turn up out of the $4.50 level reinforced the argument the next major move coming will be up, not down.

***** Basis Trends:  Gulf SRW +50, up 5, HRW - na, Corn Belt/SRW - stdy, Midsouth – stdy, HRW – stdy/up 10.

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