Commentary
The tentative bottoming wheat market action seen in early summer was negated by USDA’s unexpectedly large wheat production forecast on July 12th in my opinion. Wheat ending stocks came in at 856 million bushels versus an average trade guess of 788. The US market needs the export interest to pull down the carryout because the commitments logged to date do not materially draw on supplies. Also, pressuring is concurrent corn losses that likely added to the recent downward pressure. Today though the story changed, and short covering emerged. French wheat ratings dropped sharply stirring other markets to enter into a short covering type trade today with US futures following Paris futures. French Soft wheat good to excellent conditions went from 57% to 52% this week. The MATIF rallied the equivalent of 25 cents per bushel while the US market tried to keep pace at first but faded near the close. There was also a rumor early this morning that there was a radiation leak in a Russian nuke plant in Rostov that likely rallied the US markets up to the highs of the day, Russian officials released a statement denying the story therefore ending the rally. Funds have an aggressive short in this market and the news today from overseas prompted some short covering. Per CFTC data, they are short 75K Chicago, 43K KC wheat, and 25K Minneapolis. Technical levels for Chicago wheat at 5.53/5.59. A close above and it moves to 5.66. Over 5.66 we can push to 5.92 and then 5.97. Support is down at 5.23/25. A close under 5.23 and it is 5.04, (20% down for year). Under 5.04 and its 4.92.
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Sean Lusk
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