Wheat was the start of the futures rally.

Published on: 14:17PM Dec 30, 2010


MGEX offers several top fundamentals for 2010 which shaped the market. Two rallies occurred, the first of which occurred when the index funds switched from a net short to a net long positionin wheat futures, one day before the USDA released its scheduled Quarterly Stocks and Planted Acreage reports. The second rally came a week later on news of Russia’s drought. Despite heavier than usual world stocks of wheat, it appears investment money wanted to make certain it did not repeat 2007-2008. While USDA reports were succinct in nature, Russian drought news caused export talk to be jittery.
The trade was concerned about the April 20th oil explosion in the Gulf of Mexico impacting international crude oil futures. However, grain futures were not impacted, as it was anticipated they would be.  
International headline stories were more weather related and came from several parts of the world. Whether it was too dry in Russia, Argentina, western regions of the U.S. and Australia; too wet in eastern Australia and the Midwest; or too cold in Russia and China, there appeared to be a correlation between the news coverage and the corresponding futures price rallies.
China made headlines when it raised its interest rates twice in 2010, but the bottom-line is China citizens will not stop consuming grains and oilseeds.
China vs US
E-15 was approved in October 2010 to be used in 2007 and newer cars and light duty trucks. It not only dedicates more corn to be used than E-10 but is likely to have a positive impact on wheat usage as another food energy choice.  Year-on-year domestic corn use increase was 3.4 percent, while wheat’s use increased 4.4 percent.

 MGEX welcomes your questions.........Joe Victor



 Information used to compile this update is from publicly available sources. Nothing contained herein should be construed as a trading recommendation of MGEX, its employee or its members. For informational purposes only.