A near-record short position may be what bulls have been waiting for. Wheat appears poised for a short covering rally. Those who remember the last one think back to Oct. 5, when trend-following funds entered the week short a record 60,000 contracts accumulated on a nine-week $1.50 drop. On that day, funds began buying back short positions and in three weeks rallied 1.30, cutting short positions held from 60,000 to 12,000.

Currently, trend-following funds are short 59,000 contracts-again, a near-record short position and fat with short profits after a $1.00 drop since Jan. 11 and a $1.35 drop since Nov. 18.

FUNDAMENTALS

Fundamentals are poised to start another short-covering rally near-term. One is the winter wheat crop is now breaking dormancy in the western plains. This sets in motion the growing season ahead of the late May harvest.

The crop is vulnerable in late March and April to weather damage should an ice storm, freezing temperatures or drought occur, cutting yields and quality. The markets are in need of building a weather premium in the price, reflecting the uncertainty of this key growing period.

Additionally, shorts should be anxious to buy back positions ahead of the March 31 planting intension report on fear farmers may report they intend to plant less spring wheat acres come May in favor of corn and beans. Note: they planted about 6 million acres less winter wheat last fall.

KEY LEVELS

Major support lies at 4.72 basis May futures for wheat. A close over 5.05 suggests going long, and a close over 5.22 is a breakout to add longs with a potential short covering rally to 5.45.

Corn and soybeans look to firm up with higher prices in the near-term as funds take their month-end profits and shorts begin to buy back profitable positions ahead of the March 31 acreage report on fear of either corn, beans or both, showing that farmers intend to plant fewer acres. They trade fear before fact.

Corn is an attractive near-term buy between 3.70 and 3.60, while May beans look to see 9.25 area hold as a monthly low. Buy a close on May over 9.65 and add on a close over 9.75.