Market Analysis: It’s Time for A Turnaround in Wheat

After three weeks of lower prices, one starts to believe that their will never be another good day. Bearish fundamental news comes across the news wires in large, bold print. Pages of information illustrate the large supplies and sluggish United States wheat demand. After a time, one starts to believe that wheat prices will never recover. The wheat market could have established their low for the move this week if the saying is true that all the bad news comes out at the bottom.

Reviewing the market action in the outside markets the last half of the week gives a hint that the selling for the short term has subsided. The U. S. dollar gained over 150 points. The crude oil market lost over $6.00. The gold market lost $60.00 an ounce. In addition, the silver market lost over $2.00 an ounce. In normal times, this type of negative influences from the outside markets would have sent the wheat market sharply lower. Instead, the wheat price stabilized the last two days of the week. The March Kansas City wheat contract has a double bottom made the last two days. It is time to keep a close eye on the charts to see if this support point holds.

The USDA will release their February grain update next Tuesday. Look for minor adjustments in their ending stock number. They adjusted their export estimate last month so the trade expects the report to be neutral. The weekly sales totaled 418,000 metric tons and in the middle of the range of estimates. Twenty-two countries purchased wheat with Mexico securing 196,000 metric tons. The Agriculture Outlook Forum by the USDA is on the calendar for February 18 and 19. This forum will issue their first outlook for the 2010/2011 crop year. With a projection of six million less acres, wheat production will decrease and weather as wheat comes out of dormancy will have a major affect on price.

Producers should use a decent rally in the next three months to extend their coverage on new crop wheat production. The seasonal tendency is for a high during the last part of March or the first part of April. Sometimes as secondary rally occurs in May.