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Wheat barely holds supports

Wheat had few friends this week as we were lower every day except Friday, which may actually turn out to be the most important day of the week. As the corn continued its slide, wheat had little choice but to follow, considering it's been shadowing corn for months and its own fundamentals are increasingly bearish.

There was a ray of hope, however, as we moved through Friday's session, with corn giving us a nice reversal on the front months and an outside day higher on the back months. Even a few wheat contracts managed an outside day higher as well. It's clear that corn continues to be the leader of the grain complex and wheat will be in its back pocket for the foreseeable future.

The corn market was trading lower on Friday until Informa released their spring plantings estimates. They projected a 9.5 million acre increase in corn plantings at 87.834 million acres; a 5.1 million acre reduction for soybeans to 70.384 million acres; and a .9 million acre reduction in other spring wheat plantings to 14.0 million acres.

The trade was expecting slightly higher corn acres, and took Informa's news as bullish, at least for 5 minutes, at which point heavy selling stepped up and again pushed the market lower. Despite the attempts to keep corn lower, the remainder of Friday's session saw persistent buying in corn, then wheat and finally spilling over to soybeans as well. The buying took us well off the lows of the day and established some impressive technical formations; maybe it's enough to establish seasonal lows.

The problem for wheat, however, is that if it weren't for corn, wheat would be in trouble. Fundamentals are not improving with the new wheat crop growing and moisture conditions looking quite good for most areas. Weather forecasts are calling for plentiful rains across the southern and central plains next week and so far, we don't hear of any stress to the US crop. That goes for much of the northern hemisphere as well, with crops breaking dormancy in good shape with little moisture stress in most major areas.

The trade is anticipating a big winter wheat crop, but obviously we're a long way from bringing it home. The kind of sell-off wheat has seen over the last couple of weeks should be enough for now, at least until we get a good look at the Kansas crop, which grows 25% of total US winter wheat production. As we head into late March/early April, we usually see some kind of weather premium built into the market, and again (hate to belabor the point), corn is still the leader and it looks to me like corn has also established at least a seasonal low.

In addition to a big wheat crop on the way, we're still having trouble exporting the old crop. This week we saw Egypt buy another 120 TMT from Russia, and none from the US. This late in the marketing year and Russia is still a major player in the export arena. For a region that is not even officially considered a major exporter, they've sure been able to set the tone for world price for this entire marketing year. So much for tight world stocks and making the buyers come to the US for quality wheat this year.

I think it's well past time to give the FSU their due when it comes to being a major player in the export market; they obviously can compete with anyone and their supplies are becoming much more consistent, not to mention of high quality.

India might provide some business hope this new marketing year as they announced that they will allow up to 3 MMT of wheat to be imported duty-free. Despite a bumper crop being harvested, they apparently may still need to import wheat to keep domestic prices in check and to replenish government stocks.

Technically, wheat's charts took a pounding this week, breaching short term supports and fully testing long term supports. The reversals up on Friday are giving some breathing room, and will likely provide some upward momentum, but the longer term picture is beginning to look more bearish.

In KC May, look for support at Friday's low of 4.7725, then the January low of 4.755, followed by the September gap from 4.68-4.71. Look for resistance at Friday's high and a breakout at 4.88, followed by a swing low breakout of 4.96, and then a couple of troughs from 5.015-5.03. For Chicago May, look for support also at Friday's low of 4.535, followed by the September gap and breakouts from 4.50-4.54. Look for support at Friday's high and breakouts at 4.665, then the trough at 4.745, followed by the collection of swing highs from last week at 4.83.

This publication is strictly the opinion of its writer and is intended solely for informative purposes. It is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. Futures and options trading always involve risk of loss.

Wheat had few friends this week as we were lower every day except Friday, which may actually turn out to be the most important day of the week. As the corn continued its slide, wheat had little choice but to follow, considering it's been shadowing corn for months and its own fundamentals are increasingly bearish.

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