Wheat Futures Surge: 'Selling Opportunity'

March 15, 2012 10:43 AM
Wheat Futures Surge: 'Selling Opportunity'

Wheat futures rallied Thursday, offering what one adviser considers a selling opportunity for growers.

Tom Leffler, a broker at Augusta, Kan., said that if he were a wheat producer who had not sold, "I would be selling some wheat to take advantage of this price."
The one-day surge added more than 20 cents to nearby futures at Kansas City and Chicago and over a dime to contracts at Minneapolis.
Technical analyst Judy Crawford at Zaner Group wrote early in the week that Chicago wheat futures have been "giving appearances of forming a major bottom. If that be the case, wheat has potential technical projections to $10."
As the May Chicago contract climbed Thursday, she said, "Today it blew right over the 20- and 100-day moving averages on the daily chart." She reported technical support for the May contract at around $6.50 and resistance near $6.78.
Fundamentals didn't offer a good reason for the rally, said Leffler. Weekly export sales were below the low end of trade estimates. The European Union reduced its wheat harvest projection by 2 million metric tons to 139.5 million, but that' still up 2 million from last year’s crop. 
However, fund buying lifted futures for grains and soybeans, he said.
Wheat traders did get some supportive export news. Egypt bought 60,000 metric tons of wheat from the United States and an equal amount from Canada. Iraq bought 300,000 metric tons from Canada. USDA's weekly export sales report showed Iran had purchased 60,000 metric tons of U.S. wheat in the week ended March 8.
The rally carried nearby futures settlements into the mid-$6 range at Chicago, to more than $7 at Kansas City, and into the $8 range at Minneapolis.
Futures gained even though USDA's current supply and demand estimates indicate plentiful supplies:
  • Domestic ending stocks this months are projected at 825 million bushels, down 20 million from last month and down 37 million bushels from last year, but still equal to 38% of expected use. Higher exports more than offset lower expected food use.
  • Global supplies are about steady from last month's projections. This month's estimate of world production is up to a record high, mainly on increased Australian production. However, the 2011-12 year started with lower stocks mainly because China's inventory was off 1 million tons.
  • China's demand is up this year, partly to replace more expensive corn in that country. World wheat trade is rising toward a record high. However, USDA expects U.S. exports to reach 9.5 million tons, down 26 percent from 2010-11 exports.
USDA's March 30 Grain Stocks and Prospective Plantings reports will give traders fresh information on recent demand and prospects for domestic supplies.
For wheat, reports already indicate improved crop conditions compared with a year ago.
"Winter wheat crop conditions in the Central and Southern Plains are better than last year at this time," noted USDA in its March 13 Wheat Outlook report. At the end of February, Nebraska's winter wheat crop rated 65 percent good to excellent, up from 40 percent a year ago. As of March 5, Kansas reported half its winter crop in good to excellent condition, compared with 25% at the same time last year. Oklahoma's 62 percent good to excellent as of March 5 was up from 22 percent a year ago. And in Texas, 33 percent of the crop rated good to excellent as of March 5, up from 18 percent last year.
Great Plains winter wheat was emerging from dormancy last week in response to increased moisture and warm weather, reported the National Weather Service and USDA.
Leffler said wheat development is as much as two weeks ahead of normal in his area.
"So we need extra moisture and the wind do die down, or it will start to work against our crop," he said.

For More Information
View wheat prices at AgWeb's Market Center.
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