Is Wheat an Orphan?

Published on: 09:51AM Mar 27, 2010

March 27, 2010 (charts at http://catsanddogsstrategies.wordpress.com/)

Beans remain in a firm sideways zone. The expectations by the larger players are still bullish. The trend following funds got a little more bullish, the commercials a little less, but both are still net long. The comparatively poorly financed small speculators are carrying the burden of being short. If there are growing season problems, this situation could lead to rapid price escalation.

 

On the speculative end of things, we were saying that prices above 964 basis May would likely get another dime or more. And so it was. On Monday and Tuesday, the bulls tried to take prices beyond 976. When they were unable to do so, the bears decided it was their turn, taking prices down on Wednesday and Thursday. They were able to push to 942, but Friday was ‘getting flat for the weekend’ day, with the week ending at 952. Next week look for prices below 942 to lead to 930 or 925. From there, rally is more likely than further decline, but we’re not going to guess more than one dance at a time.

 

Corn is more bearish than beans. While both funds and commercials are long, commercials got longer, funds less so and prices made a new short term low. It looks like 330, from third quarter of ’09, is the target, and down 18¢ is a nasty drop.

 

Wheat, the unloved orphan, remains the most bearish of all. There is no lower price which commercials and funds will be watching closely, at least not in recent, meaning past five years, history. The commercials are long and increased their long positions slightly this week while both the funds and the small specs are short. The funds, which mostly are trend following, added to their shorts while a few of the specs took profits. Expect to see any rallies sold, and keep expecting that until it doesn’t happen.