For a crop with the biggest carryover relative to use, wheat showed a lot of life this week, closing almost 50¢ above last week’s close. September Chicago wheat closed at $5.87 and December, $6.16. “You may want to consider storing wheat and selling to capture the carry, and sell soybeans for harvest delivery if necessary,” says Jerry Gulke of the Gulke Group. “Calculate your cost of storing out to December, March or even next July.”
There are several reasons behind the recent price strength, he explains. “With the negative outlook, a lot of traders—commercial and speculator alike—sold this market. Then we began hearing reports that we have some quality issues here and there are weather problems abroad. So traders hustled to buy back positions, driving prices higher. That factor may have about played itself out now.”
The weather issues remain, however, he points out. “In Russia, 70-mile-an-hour winds during a heat wave have just dried the crop out. We’re hearing they could have half the crop they had last year. There are problems not just there but in Ukraine and even the traditional countries in the European Union. Plus Canada’s crop is reduced because of too much rain. And a number of weather forecasters say the shift out of El Nino to a possible La Nina mean more erratic patterns.”
Those stocks are still available, but we could see some global shortages of feed wheat and stocks shrinking instead of building this year, Gulke says.