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NEAR-TERM MARKET FUNDAMENTALS: Wheat followed equity and commodity markets higher to start the overnight session, but then sold off to below Friday’s close in conjunction with a sharp rally in the dollar. The early strength took the May contract above Friday’s highs to the highest level since January 19th. This came after trend-following funds again trimmed their large net short position on the latest Commitments of Traders report. The report showed Non-Commercial no CIT traders (trend-following funds) as net buyers of 2,135 contracts reducing their net short position to 63,168 contracts. Index funds were net buyers of 3,954 to increase their holdings to 97,758. The Farm Minister of India again called for a good winter wheat crop in comments on Friday. He indicated that this is expected to help cool the recent sharp run up in domestic food prices. Iraq reported on Sunday that it bought 380,000 tonnes of wheat on a tender that closed one week ago. This was more than expected last week. Thailand plans to buy 80-100,000 tonnes of wheat according to trade sources. Vietnam is expected to ship only 400,000 tonnes of rice in March which is down 48% from last year. A major trading company in Japan has indicated that it is considering entering the Russian wheat market. This follows comments by Russian officials last week that they intend to aggressively pursue Far Eastern wheat sales during the next two years.

TODAY’S GUIDANCE: The failure to hold the early overnight gains indicates that wheat will need support from a lower dollar or else general buying in commodity markets if it is to continue moving higher. Next resistance is at 527 3/4 in the May contract and then as high as 541. First support is near 503 3/4 and then near 495.