March wheat was 5 cents higher overnight. The dollar index was sharply higher again overnight.

Wheat started the day session on a very weak note yesterday despite strength in the soybean complex and elsewhere. However, the March contract rallied to near unchanged by late morning before staging a late burst that took the March contract to new highs for the current move and the highest close since early October. March wheat made another new high overnight and ended that session on a strong note as well. This strength has come despite two straight days of sharp gains in the dollar index which makes US wheat even less competitive on world markets than it has been in recent weeks.

Japan is in the market for 127,000 tonnes of wheat this week. This is a significantly higher than totals have been in recent weeks and fits with the string of big tenders seen by North African and Asian importers over the past month or more.

The Commitments of Traders Report for the week ending 12/30 showed buying by funds. Index funds were net buyers of 1,183 contracts while trend-following funds were somewhat more aggressive net buyers of 3,608 contracts to take their net short position down to just under 20,000 contracts. Small traders were small net buyers, but remain net short by well over 19,000 contracts. This makes the two largest categories of spec traders net short by a combined total of nearly 40,000 contracts. (The "small traders" category contains small hedgers as well).

Higher temperatures and cloudy skies in a major wheat growing area in India are leading to somewhat poor early development and increased pest infestation, according to Indian meteorological officials.

This week's export inspections recovered from last week's very low levels to stand at 10.595 million bushels. Cumulative inspections stand at 66.7% of the projected total for 2008/09 compared to a 5-year average of 59.1%. Still, the pace of exports needs to pick up and average 15.5 million bushels each week to reach the USDA's projection. Next Monday, the USDA will release Quarterly Grain Stocks, final US production numbers, a Supply/Demand Report and winter wheat seedings.

In the US, seasonably cold temperatures are expected in the Midwest and Plains to start the week. Snow is expected Wednesday in the central Midwest with snow in the eastern Midwest on Thursday.

Japan is in the market this week for 127,000 tonnes of wheat on its regular weekly tender. Jordan has issued a new tender for 100,000 tonnes of wheat for April-May shipment. Pakistan issued a tender on December 29th for 250,000 tonnes of US white wheat. Deadline for bids is January 10th. Bangladesh issued a tender on December 29th for 100,000 tonnes of optional origin wheat. Bids are to close on January 19th. Traders are still awaiting results of Morocco's tender for 300,000 tonnes. Syria is tendering for 200,000 tonnes of soft wheat after rejecting offers on a previous tender. Saudi Arabia is expected to tender for 200,000 to 300,000 tonnes of wheat in April-May in addition to a previously announced tender for early January.