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NEAR-TERM MARKET FUNDAMENTALS: Wheat responded to weak outside market influences overnight with traders indicating that the dollar seems to be the major price factor in wheat this week. Traders indicate that yesterday’s sharp run up in the dollar turned funds to the sell side after these traders had been strong buyers on Tuesday. A higher dollar again overnight brought further pressure, but one trader noted that there appeared to be a limited pool of sellers. India’s Farm Minister Sharad Pawar reports that their 2010 wheat harvest is likely to be above the previous year’s record of 80.6 million tonnes. This may cause storage problems there and could result in India lifting its current ban on imports. Wheat stocks in India as of February 1st stood at 20.6 million tonnes, up 22.6% from a year ago and this is the main source of concern over storage. The improving supply outlook in India in recent months has brought periodic indications that the ban on exports could be lifted, but sources there indicate that any deals may be government-to-government as opposed to sales by the private sector. Egypt is tendering to buy up to 60,000 tonnes of wheat for delivery during the first half of May and Japan has bought 21,002 tonnes of feed wheat. Other news is light with the USDA’s Export Sales report delayed until tomorrow morning due to the President’s Day holiday on Monday.
TODAY’S GUIDANCE: Yesterday’s sharp retreat makes the wheat market vulnerable to a test of the recent lows just above 480 in the May contract. A push through to new highs in the dollar index this week would make that test more likely, but a retreat in the dollar could bring renewed short covering by trend-following funds. This could result in a move to near 530 in the May contract. It’s all about the dollar right now. First support in May wheat is at 505 3/4 with next support at 495 to 498. Next resistance is at 527 3/4.
