Corn, Soybean Markets Strangling Wheat

October 18, 2010 07:30 AM

“Wheat is the unloved step child this week, as it has been for several weeks,” says Ron Davis of the “Charts and Hedging” blog. Several market analysts.

Here are four marketing analysts’ views of the current wheat market: 

Alan Brugler, Market Watch
Wheat futures were down at all three exchanges this past week, despite a small rally on Friday. Spread activity favored corn and soybeans against wheat for much of the week, looking for a traditional post harvest rally in corn and beans that would outstrip any wheat gains. A few of those positions were unwound on Friday, with legitimate questions about whether that spread would work normally given the contra-seasonal rally in the corn and beans coming into harvest. Wheat weekly export sales for the prior week were only 377,000 MT vs. trade expectations for 500,000 MT or more. A much more aggressive pace is needed to meet USDA’s forecast for the year.
Ron Davis, Charts & Hedging
Wheat is the unloved step child this week, as it has been for several weeks. The price action continues to look as if any good news will send prices tumbling. The funds are net short, a bit shorter this week than last, and the commercials have the other side of the trades.
Wheat - I personally see very limited downside risk from these levels considering corn and beans stay in strong demand.  I see good support in the Dec Chicago contract in the $6.85-$7.00 range.  On the upside I believe we could see $7.50 before hitting a wall. This gives us a risk to the downside of about 5-15 cents, and profit a potential of 40-50 cents. If you are just getting to the dance I think the girl you have to go with right now is wheat. Looks to me like the least amount of risk with a good amount of upside potential. 
The present 127 days supply of wheat represents less than 5 months or 35% of one full year. Make certain you are aware of the potential fall and spring wheat seedings for the 2011 harvest for national and international price reaction. International day’s cushion is now 81, off 10 days from the previous marketing year and compares to a five year average of 80 days. Be aware of the tightness in the corn supply and restricting in wheat as well as growth within rice.


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