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Will We See $8 Wheat?

Wheat futures continued their torrid climb today, posting a new all-time high price of $7.88 ½ per bushel for the December contract as continued strong exports and concerns about Wheat production from Australia and Argentina have underpinned this historic bull market. This morning, the USDA reported U.S. Wheat export sales totaled 1.23 million metric tons for the week ending August 23rd, well above the high end of pre-report estimates. U.S. Wheat sales have soared the past few months despite prices that are nearly double that of last year. It appears that world Wheat ending stocks will be near 26-year lows, with the latest USDA estimate coming in at 114.8 million tons for the 2007-08 marketing year. This has forced Wheat buyers to obtain supplies from the few countries that currently have Wheat available for sale – including the U.S. – and is the key reason U.S. exports are up sharply despite high prices. The once unfathomable $8.00 level is now seen as the next resistance point for December Wheat, with support found near the $7.24 area. December Wheat closed at $7.84 ½, up 26 cents.

After falling to near 3-month lows yesterday, Cotton futures rebounded sharply this afternoon on the strength of solid export sales and short covering buying. The USDA announced this morning that U.S. cotton sales for the week ending August 23rd totaled 476,300 running bales for the 2007-08 marketing year. This was well above pre-report estimates, and sharply above the previous week’s totals of 400,500 bales. During yesterday’s sell-off, commercial buying emerged, allowing prices to close well above the day’s lows. Speculative short covering buying was seen above yesterday’s highs of 5810. A double-bottom formation appears on the daily chart for December Cotton in the 5560 to 5565 area, and should act as strong support. Minor resistance is seen at the recent highs of 5938, with major resistance found at the 20-day moving average of 5995. December Cotton closed at 5907, up 165.

Mike Zarembski, Senior Commodity Analyst