Thursday saw wheat take a sharp 8 cent drop in the market suggesting a key reversal to technicians. But not so fast, let’s analyze it. Several things entered the market all at once. First, the weekly export sales report came out showing 212 thousand metric tons was sold last week down 36% from the week prior. Second, Egypt the world’s largest buyer of wheat in the world market came in and bought 240 thousand metric tons of which 120 thousand came from France, and 60 thousand each from Romania and the Ukraine. None bought from the U.S.
Additionally weekly crop condition reports showed number 1 wheat producing state Kansas at 56% good to excellent condition. Only 10% under what would be considered near perfect. Oklahoma came in at 67% with Texas in at 46% up 4 percent from the week prior. Finally the 6-10 and 11-15 day forecast shows the western wheat states with wet conditions as the crop breaks dormancy in need of timely rains and sunny warm days.
All of these news stories emerged on March 17th and led to the correction. Some weather forecasters are projecting a hard freeze in the winter wheat belt Sunday. Most of the crop is not far enough along with kernel development to be damaged, but the root system could be hurt if the freeze was deep enough or long enough. This could bring fear into the market leading to possible short covering. Additionally we are only 12 days away from the planted acreage report where early indications are it will show that we planted less spring wheat and more beans in the western plains. Support on May wheat lies at 4.62, then 4.50.
Any move to 4.50 would be a good buying point for the market to begin to resume a short covering rally into the beginning of the growing season in which a weather premium needs to be built in eventually pushing it to the 5.00 resistance level. A close over 5.00 sets up 5.38 as next resistance. Corn too looks to continue to cover short positions into the acreage report and beyond. The export sales report for the third consecutive week came in over 1 million metric tons at 1.227 million metric tons up 5% from last week.
Though it is not a bullish number with the large old crop carry over, it certainly suggests buying breaks in the market. The weather too is unfavorable for early planting with the 6 to 10 and 11 to 15 day forecast calling for wet conditions in the Midwest followed by very wet in the southern delta which plants first. These planting delays will have traders thinking of less corn going to seed and more beans on the acreage report at month end and beyond. Additionally some forecasters are projecting a wet spring and a dry summer. Support on May corn lies at 3.65 then 3.58 and then 3.55. Resistance is 3.73, 3.78, 3.85, and then 3.98. Support on May beans is 8.88 then 8.60, resistance 9.00 then 9.20.