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Wheat at 'Critical Juncture'

00:00AM Sep 04, 2008

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Watching wheat market technicals... Technically, wheat futures are at a very important juncture following Tuesday's violation of support levels. Yesterday, December Chicago wheat returned back above the May low, but left the previous day's gap open. Support lies at this week's low of $7.57, with resistance at the top of the gap at $7.98. New-crop charts look similar. July Chicago wheat must avoid the January 11 gap area at $7.98 to avoid the risk of hitting a round of sell stops.

On the monthly chart, key support levels are: May 2008 low of $7.31 and April 1996 high of $7.17. Violation of these support levels would reopen significant downside potential.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change::

Corn: 1 to 3 cents lower. Futures were slightly lower overnight on a lack of fresh buying interest. Futures came off lows into yesterday's close, finishing around 7 cents lower. December corn futures hit sell stops on the drop through Tuesday's low, but stopped 1/4 cent shy of the psychological $5.50 mark. Wednesday's low at $5.50 1/4 is initial support, with stronger support at the August low of $5.05. To the upside, initial resistance is Tuesday's gap from $5.71 to $5.82. Strong resistance is at the August high of $6.25.

Soybeans: Mixed, mostly weaker. Futures were mixed overnight, although only the November contract was firmer -- trading around 2 cents higher. Front-month September was 11 cents lower, but the rest of the pit was mostly 1 to 4 cents lower. Futures closed mostly around 47 cents lower yesterday, pressured by outside markets and hopes for rains in the eastern Corn Belt. November beans spent the day pivoting around the $12.50 level to post a slight downside day of trade on the charts. Key support lies at the August low of $11.74.

Wheat: 6 to 9 cents higher. Futures were mostly around 9 cents higher overnight on spillover from yesterday's gains. After a weaker start, futures closed firmer amid short-covering and fresh demand news. News Egypt purchased 120,000 MT of U.S. SRW wheat resulted in some short-covering support. Early pressure came on spillover from the previous day's sharp losses and outside markets, as the dollar was stronger again yesterday. But as corn and soybean futures extended early losses this morning, wheat began to find short-covering support to avoid doing any more technical chart damage.

Cash cattle expectations: Watching beef trade. Cash cattle markets remained inactive late Wednesday afternoon and cash sources aren't expecting active trade until Friday. Most cash sources feel prices will be steady to possibly firmer compared to last week's mostly $99 trade in the Plains. Post- holiday beef demand has been strong as packers moved 412 loads Wednesday.

Futures call: Weaker. Futures are called lower based on expectations for spillover pressure. Losses intensified on fund selling late yesterday. As futures dropped, sell stops were triggered and the market slumped to a low-range close. That opens the door to potential followthrough selling pressure this morning. A choppy tone could develop, however, as traders wait on cash trade to develop.

Cash hog expectations: Mixed. The pork cutout value was down another 74 cents Wednesday and has plunged more than $12 over the last week and nearly $16 the past two weeks. The sharp drop in pork values continues to cause concerns with export demand, which has been a key price driver in the hog market. The cash hog market is called mixed today, as some western Corn Belt plants are in need of supplies.

Futures call: Weaker. Futures are called to open lower based on spillover pressure from yesterday's losses. Pressure continues to come from export concerns. There was no new export news developments yesterday, but traders remain concern about export prospects declining. Nearbys saw the brunt of the pressure. Possible firmness in the cash hog market today could result in some short-covering.