Wheat Closes at New Highs for the Year
Mar 11, 2014
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Wheat prices were sharply higher Tuesday on weather concerns and more talk about unrest in the Ukraine. Prices had fallen off the highs by the close but still managed to post impressive gains and a new high close for the year.
A cold snap following a brief warm up is causing concerns about damage to wheat crops. The US Drought Monitor Index is showing an increase in dryness in the plains and particularly the southern plains. Cold weather mid-week is now threatening to cause some damage in dry areas. However, crop ratings are mixed with Oklahoma ratings dropping but Texas and Kansas ratings improving. Wheat will now trade a weather/Ukraine market going forward.
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News that the Ukraine is off to a slow start to spring planting added support as the market is very sensitive to any Ukrainian news. As of March 7th 46,600 hectares have been planted compared to 300,000 this time last year. It is still early in the planting season, but the market is sensitive to the Ukraine situation and investors are quick to look for the "Ukraine trade" which wheat has been a big focus of. This news comes after the Ukrainian Ag ministry had said earlier that spring grain planting had begun on time and the political uncertainty had not had an effect. This may still prove to be true, but uncertainty and fear is high.
Domestically the USDA is projecting the tightest ending stocks in the last three years. While a 558 million bushel ending stocks number is not a tight enough balance sheet to demand higher prices to price ration demand it does put more pressure on producing a good crop. This means that weather will be followed closely and any threats will be met with strength in prices. On a global scale wheat ending stocks are on the larger end. This could keep a lid on prices as the US will quickly loose export business on higher prices and could end up importing on a larger scale if the situation is bad enough.
For now it seems like investors or funds that would not typically trade wheat are buying wheat to get access to the turmoil in the Ukraine.
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All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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