Wheat Commentary
July Chgo wheat closes 20 ¼ cents lower ($5.19), Sept 21 cents lower ($5.39) and Dec 18 ¾ cents lower ($5.61 ¼)
July KC Wheat closes 20 ¾ cents lower ($5.30 ½), Sept 23 cents lower ($5.46 ½) and Dec 22 cents lower ($5.72 ¼)
Informa suggests the US winter wheat crop is 1.281 billion bu. the spring wheat crop is 434 million bu. and the durum crop is 67 million bu.
Weekly Wheat Export Sales – old crop vs. 300-500 K T. expected – new crop vs. none expected
Despite Wednesday’s higher close the US wheat markets were advertising they were moving into a corrective mode given Wednesday’s sharp intra-day break. That corrective mode followed through on Thursday. As far as I’m concerned nothing has changed as the spring wheat crop remains under extreme stress. What the recent price action has achieved was alleviating the extreme overbought condition. We can see further correction over the next day or so but as long as dire conditions continue in the spring wheat areas the longer term bias will be for higher prices.
Interior cash wheat prices (basis) continue to see few if any changes. The Gulf bid for HRW is back to moving higher after a week of easing. Not much is happening with the SRW market at the Gulf. Spreads, both Chgo and KC, continue to be wide suggesting the rally has been about supply, not demand. Once we see just how short the crop may be then and only then can we see spreads possibly improve. I believe it will take lower world numbers to get US spreads to improve.
So how long is the current correction going to last? There’s an old adage “give the funds 3 days”. If true that would suggest we may have a couple of more days of backing and filling the recent extreme rally. Initial support for the current correction is the recent Friday to Monday gap. As I mentioned earlier the recent corrections has gone far in alleviating the recent overbought scenario.
Daily Support & Resistance for 07/07
Sept Chgo Wheat: $5.25 ($5.15) – $5.50 ($5.63)
Sept KC Wheat: $5.35 ($5.30) – $5.60 ($5.72)
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