Published on: 12:03PM Nov 19, 2009
We need to spend some time with wheat as it is offering an opportunity for 2009 into 2010. This leads us into our first question as to what is right with the wheat, why is it rallying. Could it be wheat has found a rally because of poor quality wheat conditions within Brazil, smaller than expected crop in Argentina, delayed soft red winter plantings in Illinois or the fact corn, beans, soymeal and soyoil has rallied and now its wheat’s turn? All of the preceding has been discussed within the industry well before the 200 day Moving Average of $5.60/bushel December and $5.96/bu July futures were penetrated. Old crop stocks of 885 million bushel, the largest dating back to 946 million in 1999 domestically and 188 million tonnes vs 202 million tonnes in 2001 globally have created the following spread, which is twice the normal amount of carry.
Spread traders of new crop July wheat vs corn have witnessed old resistance of $1.60 per bushel become new support with new resistance now found at $2.00 per bushel. Allendale Inc is well aware of the present 5 year wheat index which implies an 11.3 % rally as well as other “outside” influences such as rally in base metals and crude oil as well as channel decline in the US dollar futures.
The increasing futures whether old crop or new crop is offering an opportunity to price old crop supplies, as well as begin new crop hedging. Allendale Inc was fortunate enough to hedge its first 20% of new crop wheat this week because of the opportunity presented and will respect the seasonal index as well as other outside influences for anticipated 2010 production. Allendale Inc is well aware of the softness presented by weaker than last year fertilizer prices as well as other inputs but the hedge, spread and host of trading opportunities are numerous and we must act now.
We welcome your questions and comments.........Joe Victor
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