Wheat Looks to be Consolidating, Support from Corn Helps

Given the current fundamental resistance to higher prices in wheat, the wheat trade remains constructive. Barring any major change in the outside markets, wheat should continue to work higher over the near term. Traders looking at fundamentals are poised to sell these markets on any sign of weakness; however the market has proven to be very resilient.

The bulls in the wheat market continue to focus on the size of the net position held by trend following funds in the Chicago contract and to some extent the KC contract. At times, this position has pushed would be sellers to the sidelines. The most recent Commitments of Traders Report, as of April 20th, indicated that trend following funds were net short 61,500 contracts. We should see another slight reduction, as of April 23rd, once the report is released on Friday afternoon. Basically, we are looking at a reduction of 17,000 to 18,000 net short positions over the course of the corrective rally that began on April 5th. More momentum is needed to consider this a fundamental shift in how this short position is going to be handled going forward. (more)