Wheat Commentary
March Chgo Wheat closes 12 cents higher ($4.18 ½), May 11 ¼ cents higher ($4.29 ¼) and July 10 ½ cents higher ($4.42)
March KC Wheat closes 12 ½ cents higher ($4.26 ½), May 12 ½ cents higher ($4.38) and July 12 ¾ cents higher ($4.49 ¼)
Was Tuesday’s price action a trap or what? On Tuesday the flat price tried to poke its nose up only to show signs of failure. There was no follow selling Tuesday night or Wednesday morning. In the end it was an impressive day as closes eclipsed Tuesday’s highs. The whip-saw motion in the US dollar aided in the rally as this type of action is not unusual if a top is in the making. One of the keys behind Wednesday’s sustained rally was the USDA’s selected winter wheat states condition ratings. Kansas went from 52% GE at the end of November to 44% GE at the end of December. Oklahoma went from 53% GE at the end of November to 25% GE at the end of December. So here we have a HRW crop that is not wintering too well coupled with the talk of lower planted acres. The USDA will report on that on the 12th along with Supply-Demand updates as well as Quarterly Stocks. Last but not least index fund rebalancing will start on Monday and it will feature buying in both the Chgo and KC markets.
The interior cash wheat markets continue to be quiet while export values are holding onto recent gains. Chgo spreads continue to show a bullish bias – I think most of this is from the spec short covering. The spec in KC has nowhere near the size of short Chgo has.
After Wednesday’s turn around higher price action the March Chgo market now appears in line to test its 100 day MA at roughly the $4.23 level. Given how aggressive the spec shorts get with their covering a rally into the $4.30’s cannot be ruled out. Adding to the bullish look – today’s close in March Chgo took out an interim downtrend line that had been in force dating back to mid-October. The March KC taps at its 100 day moving average late in the day on Wednesday. If this market wants to get aggressive with its recent buying a move to $4.40-$4.45 cannot be ruled. Given how the volatility in the wheat market works it would not surprise me to see the aforementioned resistance levels tested sooner vs. later.
Daily Support & Resistance for 01/05
March Chgo Wheat: $4.12 – $4.26
March KC Wheat: $4.21 – $4.34
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