Wheat Commentary


Wheat – Just My Opinion

Dec Chgo Wheat closed 1 ¾ cents higher ($6.27), March 2 ½ cents higher ($6.26) & July 1 ¾ cents higher ($6.10 ¾)

Dec KC Wheat closed 4 ¼ cents higher ($5.63), March 3 ¾ cents higher ($5.70) & July 3 ½ cents higher ($5.79)

Dec Mpls Wheat closed 9 ½ cents higher ($5.69 ¼), March 9 ½ cents higher ($5.81) & July 7 cents higher ($5.91 ½)

Weekly Wheat Export Inspections – 239.6 K T. vs. 400-600 K T. expected

Weekly US Winter Wheat ProgressPlanted – 77% vs. 81% expected vs. 72% 5-year average – Emerged – 51% vs. 48% 5-year average

Strength in wheat continues to be all about dryness in the US HRW areas as well in the winter wheat areas of Russia. Parts of Argentina’s wheat areas saw some recent moisture but many will say too little too late. World prices continue to be strong. The lower part of the two-sided trade we saw today stemmed from the feeble looking export inspections. Once the morning sell-off ran its course the hard varieties became the leaders of the rally back. The Chgo market will show the greatest volatility as that is where the majority of the specs play their games. Going forward if the current rally is going to continue I have to think the hard varieties will resume leadership as that is where the greatest concern is at least in this country.

Advertised basis levels are not showing any changes. Bull spreads in Chgo were going gangbusters when the flat price was rallying but went flat when the sell-off ensued. The rally has not been about demand for US wheat – its been a supply fear based rally for the new crop. In Chgo Dec loses to March, March loses to May while May gains on the new crop. May is the last month of the old crop and by that time frame we’ll have a fairly good handle on the outcome of the new crop. KC spreads are much more stable vs. Chgo. Dec gains on March but after that steady to fractional gains were the rule of the day.

The higher wheat prices go the greater the volatility. Get used to it. On a daily basis the market is nowhere near overbought. Early this morning on its initial rally it was short term overbought but that was alleviated with the mid-morning sell-off. To move higher its all about forecasts for moisture and the moisture needs to arrive in relatively short order for the US HRW crop as well as the Russian winter crop. The condition of the Kansas winter crop is not particularly good – 31% GE and 24% P-VP. This should be a supporting issue for the KC market. As long as we have these supply fear issues the flat price should remain well supported when technical corrections arrive (just like we saw this morning).

Daily Support & Resistance – 10/20

Dec Chgo Wheat: $6.15 – $6.34

Dec KC Wheat: $5.50 – $5.69

 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.