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Wheat holds support

Agriculture.com Staff 11/24/2008 @ 1:18pm

Wheat started the week higher with some follow through from the previous week's strong showing, only to have an outside day lower by Monday’s close.

The rest of the week was spent chipping lower and testing the double bottom put in two weeks ago, which of course gives us a triple-bottom at this point. There continue to be persistent rumors of the US importing wheat on the East coast; while that is not a welcome thing it's happened before, and low prices and cheap transportation certainly make it feasible.

So, either the triple bottom holds and the market continues in its trading range, or we just head on further down for another leg lower. I still think we will be in a trading range through the holidays, and we should know quickly if these levels will hold. It is worth noting that despite another equity market meltdown and corn breaking its lows, that wheat managed to hold its support.

Positive fundamentals are few, but some did surface this week. Exports continue to impress despite seeing more sales going to the Black Sea, which saw Syria, Jordan and Egypt all buy Russian wheat. There were several reports again this week of Russia considering subsidizing exports, which makes little sense since they are already the cheapest sellers on the market. However, their need for cash may be pushing them to generate as much business as possible in the near term. That will certainly be an interesting story to follow.

Despite all this competitive export talk, however, the US did manage to sell 511,000 metric tons the week prior, above trade estimates and still 5% ahead of the pace needed to meet USDA's projections. While we continue to miss the marquee sales, we certainly have stayed in the game with smaller sales to a variety of buyers who want quality wheat.

Also, Australia's harvest is running into problems from, all things, rain. The harvest is running about two weeks behind schedule and quality concerns are mounting, with reports suggesting they're already downgrading some regions to feed wheat. Most of the rain problems are right in the areas where they had adequate rain during the season and thus had good production (some areas were expecting record production). Australia's harvest problems haven't made much of an impact on world prices as widespread economic problems continue to spread fear of demand destruction.

Argentina, too, is seeing more production problems. They had some frost in their northern areas which was reported to have damaged some wheat. They have downgraded their production estimates to about 10 MMT, down from 16.3 MMT last year.

In the Northern Hemisphere, cold weather is quickly pulling the crop into dormancy. Most major growing regions look quite good with robust growth and healthy plants as they head into the winter months. The Black Sea region was reporting cold temperatures, but also enough snow cover to prevent plant stress. The US southern and central Plains look good for the most part, with nation wide good/excellent ratings at 66%, down 2% from last week but up 21% from last year. Kansas is rated at 71%, with Texas at 50%, Oklahoma at 63% and Colorado at a whopping 83%. Clearly, the table is set for a good crop next year in the plains. We'll have to wait and see if Mother Nature follows through.

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