Fund rebalancing in wheat over deteriorating crop concerns in key hard red winter wheat states sent wheat futures to new multi week highs this week. Wheat's gains come on fears of winterkill and dryness as state by state reporting in key areas show deteriorating crop condition. Kansas, Colorado, Oklahoma, and Texas are without snow cover against frigid temperatures this week throughout those regions. While winter kill is difficult to assess at this time of year, funds will always trade fear before fact. Index and trend following funds came into this week short over 108K contracts, a sizable short in the market. On top of that the average estimate for the January 12th crop report had wheat seedings at 34.3 million acres versus last year’s 36.1. However some analysts have this number at just below 32 million acres. Should the number come in below 32 million, and winter kill issues persist not only in the U.S. but the Ukraine as well, we could see spot futures trade back up to multi week highs on continued short covering. For wheat futures to continue to rise, the USDA will need to show lower seedings coupled with funds buying adding a weather premium. Without these, burdensome ending stocks which still sit at over 1.1 billion bushels domestically combined with ample global stocks will continue to weigh on the market as weak demand persists.
Chicago wheat futures finished the week right at the 100 day moving average at 4.23, settling just above it the session prior on January 5th. While the fundamentals remain bearish, closes above some key moving averages will give notice to technicians, and uncover additional fund short covering which in my view will result in higher prices.
Technical’s read like this for this week. For March soybeans support is down at 9.86 and with a close under 9.78 is next. Resistance is up at 10.10 and then 1024. For March corn support comes in first at 3.52 and then 3.46. Resistance comes in at 3.63 and then 3.69. For March wheat support comes in at 4.09 and then 3.95. Resistance is up at 4.32 and then 4.42.