Our last demand-side report came out with Thursday's weekly export sales report. For wheat ?" Boreing. Export sales were 325,000 metric tons, down 20% from the week prior and equal our weak four-week average. Even a $0.20 drop in prices last week and a $0.45 two-week drop in prices could not bring demand to U.S. ports. But bears in the market are nervous as we head into month-end and April. A near-record short position held by trend following funds may have wheat poised for another short-covering rally similar to last October 6, when trend-following funds entered the week short a record 60,000 contracts accumulated on a nine week $1.50 drop in prices. On that day, funds began buying back short positions and in three weeks rallied $1.30 cutting short positions from 60,000 to 12,000 contracts short. Currently they hold a near-record 59,000 short contracts fat with profits after a $1.00 drop since January and $1.35 drop since the November high.

Fundamentals are poised to start another short covering rally on two fronts. 1) our winter wheat crop in the western plains is now breaking dormancy. This sets in motion the growing season ahead of the late May harvest. The crop is now vulnerable in late March and April to weather damage should an ice storm, freezing temperatures or drought enter cutting yields and quality. Quality is a key wheat pricing ingredient as wheat is grown for human consumption. The market's 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 in favor of more profitable corn and bean crops. Note, they planted almost 6 M.A. less winter wheat acres last fall.

Though strong support lies at 4.72 basis May futures, avoid the long side until charts signal the turn up. Buy a close over 5.00 next week and add to your position on a close over 5.24, with 5.42 to 5.50 as an initial target should the short-covering rally ignite.

As for corn, export sales were 747 T.M.T. almost double the week prior. Asian countries were in for 424 T.M.T., versus 267 the week prior. Asian business is the key to corn's demand as seasonally they account for three-quarters of our exportable feed grain exports yearly. I expect China, who normally supplies their Asian neighbors with corn to halt these exports, keeping corn home in 2010 to meet feed needs on expanding hog and chicken populations and a mandate to increase corn-based ethanol, all after a recent drought cutting their corn crop appreciably.

As China goes from an exporter to importer, it also leaves surrounding Asian neighbors of there's to fill their needs on U.S. ports. Well, did corn post a low this past week that can hold into the March 31 acreage report? Possibly. Corn entered the week down $0.32 from the March 1 high. So, recent trend-following funds short positions are fat with profits. Next week is the last full week of trading in the month and funds should expect to further buy back short profitable positions and earn those month-end bonuses.

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