Grain and livestock futures ended mostly higher Wednesday, except for soybeans and meal.
Ted Seifried, Zaner Ag Hedge, says wheat led the rally and pulled corn along with both making new highs for the move as funds covered shorts.
The wheat market was adding risk premium due to geopolitical concerns with an escalation of the war in the Middle East, plus global weather issues were supportive.
He says, “Certainly when you have uncertainty over weather and global conflict happening with major wheat producers and that means higher prices especially when you have managed money that had been short the wheat market.”
Technically, December corn and December Chicago wheat both crossed the important 100 day moving average on the charts.
How much risk premium does the wheat market need and with the strong technical signals will managed money traders continue to buy?
Seifried says, “I think the funds are getting close to being done covering their short positions in wheat and I don’t think they are looking to get long.”
In fact, he thinks funds have covered a large percentage of their record short in all the grains.
“The funds had been short about 124 ,000 contracts as of last Tuesday with the amount of strength that we’ve seen since then. You would figure that they are probably pretty close to 60 ,000 or maybe even 40 ,000 left on their short position. So there’s not a whole lot of fund buying power, I think, left in the market,” he explains.
So he doesn’t see a lot more upside potential in the grain markets.
In fact, soybeans were slightly lower for the day and may be the first market indicating the funds have pushed far enough as the November futures have been unable to take out chart resistance.
The soybean complex is also in a holding pattern he says awaiting Brazil rain confirmation and yield projections from the October WASDE.
Cattle and hog futures also soared into new near term highs pushed by fund buying.
Plus, he says the managed money seems to think the East and Gulf Coast port strike will be short lived or will invoke supply chain disruptions that will cause stockpiling similar to COVID.
