A rally in wheat prices is coming in the near future, representing the first in a series of events that will end bear markets for commodities in 2016, says Mike Florez, Florez Trading.
“One thing that does interest me is the wheat market,” Florez tells “AgDay” host Clinton Griffiths. “The funds are really short the market big time. Five times in the last four years, they’ve gotten this short. Every time they’ve gotten this short, a rally has ensued. The smallest rally you got was 75 cents, the biggest rally you had was $3.50. I’m going to play this. I haven’t bought anything yet, but I think the smart way to play that is to buy some calls on May wheat. Something that’s 10 or 20 cents out of the money might pay off pretty well.”
The wheat market likely will bottom first, followed by other commodities as the new year continues, he says.
“I do think the bear markets will end in 2016,” Florez says. “I look at time cycles. Where we bottom now has a direct correlation to where something topped or bottomed in the past. It’s coming due in 2016, probably springtime. We could certainly get lower into then. Typically when markets bottom, they kind of get ugly; they get volatile and the bottom falls out. I don’t know if we’ll be in that situation, but it’s akin to what oil is going through right now.”
In the meantime, producers should sell corn and soybean rallies as they have the opportunity, Florez says. He doesn’t expect any big drops for those markets.
Click the play button below to watch the complete interview with Florez.