Wheat is in panic mode!
Aug 15, 2010
The wheat market moved into panic mode today with the announcement by the Russians that they are suspending all wheat and corn sales. End users are in a panic mode to cover needs. This sharp rally is causing concern equally for all sellers in the form of margin calls. The big positive is the market is now getting into solid price levels not seen since last November for wheat, corn and beans.
The main leader today was wheat. The December wheat contract has mushroomed up to $8.154 up the 60-cent price limit. This I have to suggest fits the classification of a market in panic mode. Everybody remembers what happened to trapped shorts in 2008 and no body wants a part of the short side right now. I find this very interesting, while I’m hearing there is still a lot of inventory being stored in the bin by elevators. Wheat is all about fear!
How high can we go is the big question of the moment. I could give you a technical swing objective or previous overhead resistance levels but they are really insignificant in this type of market. My suggestion as a producer is you have to slowly scale-up sell into the this market as it attempts to reach a level where demand is rationed and new supply will be assured. I’m all ready getting solid evidence that July 2011 at $7.75 to $8 is going to attract acres back into production. My suggestion is you should be at least 50% forward sold in the July 2011 contract with the strategy of rolling forward to capture carry if the inventory can be stored on farm.
The December 2010 corn tested $4.386 while December 2011 corn tested $4.50 before retreating after the open. I anticipate there have been several open orders filled by the commercials as farmer orders are being filled for cash sales. I have to suggest we are into solid overhead resistance. A lot of the bullishness will be factored into the market before next Friday’s USDA Supply and Demand report. One should be scale up selling into the report. Now is not the time to be buying this market. In fact the July 2012 contract traded as high a $4.716 bears close examination by any producer interested in protecting profits.
Finally, November beans moved up to $10.49 on the open but started to retreat in late trading and closed unchanged. Today’s inability to hold the gains must be viewed as a small concern for the bulls. I would not be surprised to see this market remain firm until it see the next week’s report. While there are pockets where beans are not getting rain, overall most of the bean production areas are receiving some moisture in August. Farmers tell me this makes grain. A U.S. yield any place close to 44 bu./acre should work, turning prices lower as we move into harvest.
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