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MGEX Research

RSS By: Joe Victor, AgWeb.com

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

Wheat to Lead Corn?

Mar 10, 2009
 
Allendale Inc explained in a recent research article two (Oklahoma and Texas) of the top four US winter wheat producing state’s crop condition ratings are far less than desirable. With #1 wheat producing state of Kansas now updating its weekly condition report for the second week, it may come as little surprise of a down grading of its fair, poor and very poor ratings.
National ratings for winter wheat may not become known until April 6th to provide an overview of the potential production for 2009. However Allendale Inc suggest it may in fact be the KCBT’s new crop July futures which may assist in leading a spread verses CBOT’s July corn futures into a short term rally.
Fundamentals point towards a deteriorating crop in large part to various degrees of drought within the southern Plains and yet immediate forecast (03/10) suggests a small chance for moisture in the next 6 to 10 days in the much-needed areas of the HRW wheat belt. For 2009/10 Allendale’s research does suggest for each one bushel decline in national yield, production could drop by 48 million bushels.
According to the Climate Prediction Center much of Texas and Oklahoma wheat country requires up to three inches of rain in order to bring the Palmer Drought Index to neutral status.
Private weather service’s long range forecast, continue to advertise the March – April bias as one of warm and drier than usual for the southern Plains.
As evidenced by the KCBT July Wheat vs the CBOT July Corn spread note the potential near-term bottom of $1.89 premium the July wheat and equally important is how the spread was able to break up through the psychological resistance barrier of $2.
Allendale Inc must point out technical traders may view the recent $2.42 high to $1.89 low and look to $2.15 as 50% retracement resistance. Equally important,  the technical trade may micro view the most recent spread trade of $2.10 high posted on March 6th vs the Feb 26th $1.89 low and use 50% retracement of $2 as support.
Based on overall bullish developing new crop wheat fundamentals, Allendale Inc advises to implement the KCBT July futures vs the CBOT corn spread shortly after the 9:30 am futures opening after issuance of the March USDA World Ag and Supply Estimates report on Wednesday. If USDA releases a neutral report for the grain end stocks we would advise entering the spread at $2.03 premium the KCBT July wheat, risking $1.87, with an objective of $2.34.
Allendale Inc would appreciate your thoughts and ideas regarding the potential supply decrease within the key southern Plains and the impact it may have on the potential spread discussed….Joe Victor
 Contact your Allendale broker with alternative trade strategies. 800-551-4626
 
 
 
 
 
 
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2009
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