Wheat Commentary
July Chgo wheat closes 2 ½ cents higher ($5.39 ¼), Sept 5 cents higher ($5.60) and Dec 6 cents higher ($5.80)
July KC Wheat closes 10 cents higher ($5.51 ¼), Sept 10 cents higher ($5.69 ½) and Dec 10 cents higher ($5.94 ¼)
Overnight Egypt tendered for optional origin wheat – overnight Egypt bought 410 K T. of wheat – 350 K T. Russian, 60 K T. Romanian
Weekly Winter Wheat Condition – 48% GE vs. 49% expected vs. 62% last year – Harvested – 53% vs. 56% last year vs. 54% 5-year average
Weekly Spring Wheat Condition – 37% GE vs. 38% expected vs. 72% last year – Headed – 59% vs. 71% last year vs. 54% 5-year average
It was a wild ride for Mpls wheat Wednesday – initially Mpls wheat rallied to 52 cents higher on the day and then broke 94 cents to 42 cents lower on the day – all of this occurred within the first 75 minutes of the session. The balance of the session was spent retracing the break. The rationale was all about profit taking given its extreme degree of overbought. Despite the extreme volatility Mpls prices still finished with slight gains on the day. Needless to say the action in Mpls did influence the Chgo and KC markets but to a much lesser degree. Chgo prices went from 20 cents higher to near 19 cents lower only to finish with modest increases. The KC market went from 18 cents higher to near 18 cents lower only to finish with decent increases on the day. Despite the profit taking the price breaks were well received. Overall nothing has changed in respect to the idea that the US wheat crop continues to shrink led by the spring crop. Forecasts for the developing spring wheat crop suggest blistering heat over the next number of days. Until we can get a better handle on crop size the bias will continue to be for higher prices.
Interior cash wheat markets (SRW & HRW) after rolling to basis Sept are showing some slight improvements. Nearby Chgo spreads don’t reflect it as last Friday’s increased deliveries against the respective July contracts continue to circulate. It should be noted however that Dec and March contracts are indeed gaining on their respective deferred contracts. KC spreads ran absolutely flat on the day.
So does today’s round of profit taking signal the end of the rally may be near at hand? As long as the perception that the US wheat is shrinking the bias will be for higher prices. the US wheat markets could easily stay firm right up to July 12th when the USDA updates production in the US as well as the World. The initial target for the Sept Chgo contract is $5.90; its contract high that was made back in June of 2016. My records are not that complete for the Sept KC contract but it looks like its contract high was just over the $6.00 level made back in June/July of 2015.
Daily Support & Resistance for 07/06
Sept Chgo Wheat: $5.35 – $5.90
Sept KC Wheat: $5.40 – $6.00
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