While analysts this spring sound increasingly bullish on corn, many see bearish risk in wheat in the months to come.
On U.S. Farm Report on Saturday, Allendale’s Bill Biedermann cautioned that farmers may not see a rally in wheat until the fall. “The odds are that 2 out of 12 years, you’ll see a market that just continues to go down throughout the year,” he said, adding: “It would be very disappointing.”
It could also leave wheat farmers quite exposed. “The problem with this year, more than other years, is that the farm community as a whole is not as heavily sold out ahead as normal,” Biedermann observed. “So there’s a financial risk out there that’s larger if [a long-term bearish market] happens.”
Listen to Biedermann's comments on wheat here:
Weather remains a factor to watch.
“Typically, there is five or six big wheat-producing countries in the world, and we haven’t had a problem for a couple years" in terms of weather," said Brian Roach of Roach Ag, also speaking on U.S. Farm Report. "We had hard winter wheat dryness. That’s been largely resolved or thought to be. ... A stable conditions report on Monday could lead us to lower lows still ahead.”
Others are also watching wheat warily.
“Wheat has two situations developing, completely opposite of the other,” Tim Hannagan, Walsh Trading’s senior grain analyst, blogged Friday. “First, the bullish side Monday’s crop condition report showed 42 percent of the winter wheat crop in ‘good’ to ‘excellent’ condition, down from 44 percent the week before. … Failure to get needed rain would deteriorate the crop, further dropping the ratings and creating the potential for a short-covering rally.”
“The bearish side also exists,” Hannagan added. “WXRISK.com, the AG weather site, is calling for substantial rains across the winter wheat belt states. … Should these rains develop as called for we could see a sharp increase in the crop condition ratings, (and) this could have index funds holding long 122,000 contracts begin to liquidate as an improving crop rating would suggest higher yields, better protein, and bigger crop.”
How low could wheat go? “This would have us test $4.70 support, then a bounce before taking it out,” Hannagan said.
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