Commentary
Wheat short covering stalled out today after the CFTC showed the Managed Money sector had reduced its position by approximately 25%. Managed Money is short over 76K contracts while hard red or KC wheat shows managed funds short 48K. Condition ratings are a tale of two cities. Therefore, Chicago wheat fell further today than KC as the soft red winter growing areas which predominately lie East of the Mississippi are forecasted to receive sufficient rainfall. Half of the Southern Plains are set up for beneficial rainfall, keeping the trade concerned about the other half of the hard red winter belt that is bone dry. All wheat as a whole came in with a condition rating at 49 percent good to excellent, down 1 point on the week but up 21 points from last year. The big problem area is number one winter wheat producer Kansas. G/E ratings in Kansas were down to 31 percent, down another 5 points on the week with the poor/very poor category rising to 31 percent. Russian offers are somewhat soft to start the week as the US is still at a $65 FOB premium to Russia. Extended weather forecasts turn significantly drier in Russia which has become worrisome for the trade as precipitation is less than 50% of normal in the last 30 days with not much relief in sight. Technical levels for the remainder of the week come in as follows. Support for July KC at 642. A close under and its 626. A close underneath and its 610 and then 605. Resistance is at 664. A close over and its 674. A close over 674 and it’s the 50-week moving average at 682. We clear these areas, and the market could rally to 7.06, which represents 10% higher on year. There are some supply side concerns with deteriorating ratings at home and abroad that has prompted short covering. However, demand for US origin is lacking for now which offsets some of the weather premium. Trade the charts.
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