Wheat Commentary
March Chgo Wheat closes 3 ¼ cents higher ($4.52 ¼), May 4 cent higher ($4.67) and July 4 cents higher ($4.78 ¾)
March KC Wheat closes 6 ¼ cents higher ($4.66 ¾), May 6 ¼ cents higher ($4.79 ½) and July 5 ¾ cents higher ($4.90 ¼)
Weekly Wheat Export Inspections – 307.5 K T. vs. 350-550 K T. expected
Last Thursday an interim buy signal (possible long term buy signal) was registered for Chgo wheat futures. KC wheat suggested similar signals on Friday. Since last Thursday’s low Chgo March wheat has rallied 26 cents and KC March wheat has rallied 30 cents. Short covering has been the primary buying in Chgo – dating back to February 7th the daily trading fund activity suggests 29.5 K contracts have been covered. Some of the impetus behind today’s rally was a story out of the Ukraine about a good portion of their wheat sitting under a crust of ice as well as much above normal temps in the US southern reaches of its HRW belt (creating fears of breaking dormancy too early leaving the crop vulnerable to yet another hard freeze). Given wheat the USDA told us in January as to the decline in winter wheat acres it makes prices extremely vulnerable to any weather play between now and May.
The interior wheat basis, no matter the variety (HRW or SRW), continues to be quiet. It seems all the volatility in these two cash markets is in their export values. The HRW export basis rallied into early February, broke down hard and is now back to the levels it had attained in early February. The SRW export basis has been working lower in an irregular fashion. It was just last Thursday that the March/May Chgo spread traded into 10 ½ cents carry; today it traded out to a 15 cents carry. KC spreads had been working sideways to lower started rallying early las week. The moves have not been major but it does go along with the flat price action. The point I’m trying to make here is that the wheat market is no longer the month’s old sideways trading affair.
Technical indicators for wheat are very similar to that of the corn market (after all they are both feedgrains). As much as I believe long term bottoms are in the making shorter term indicators suggest we don’t have to buy the current rally. 6-10 day forecasts suggests bountiful moisture moving into the central southern US Plains. Short term traders may want to look at fading any further strength on the upside looking for a correction while longer term traders will want to use some patience and wait for the correction to wash out some of the “johnny-come-lately” longs.
Daily Support & Resistance for 02/14
March Chgo Wheat: $4.42 ½ – $4.56 ½
March KC Wheat: $4.56 – $4.70
The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.