Grains end mixed Friday but higher for the week led by wheat.
Darren Frye, Water Street Solutions, says the wheat market has been rallying on U.S. and global weather and crop concerns.
Does that market have enough risk premium built into the price?
Frye says a lot will depend on the weather and there is rain the forecast for the Western and Southern Plains. “If we get that we could see Kansas City wheat down harder than Chicago, but the strength really came from the fact that we haven’t had the rain yet,” he says.
If those rains are disappointing and crop ratings for winter wheat drop again on the Monday USDA Crop Progress Report the market may need to take the next leg higher.
The move in wheat has also been technical so are the funds about done covering their short position or will they continue to buy?
All three classes of wheat are above their 100 day moving averages and Fyre says, “Yeah I would think that the speculators are a little bit nervous considering how far we moved off the bottom but as of last week they hadn’t covered a whole lot. The funds have made a lot of money in wheat, they’ve been short a long time and so I wouldn’t expect them to bale quickly.”
Corn has been moving higher with wheat but is just on the top end of its sideways trading range. Frye doesn’t think corn can take out those chart areas and keep moving higher even if wheat keeps climbing. “I think it’s going to take USDA to recognize a different size crop in Brazil and Argentina. I think the market needs to see that. In addition, I think we’re going to need some planting delays and it’s way too early for that.”
Soybeans have also consolidated under the highs set back on the day of the USDA Prospective Plantings Report and may not be able to retest those areas with the weak export pace. “We also need to get bean oil on board which is hanging out at its lows. We also need to see Conab and USDA estimates come together on Brazil. Without direction that market will continue to drift and see fund selling with the funds still short,” he says.
Live and feeder cattle futures made new highs for the move on Friday helped by stronger cash. “The cash came along on Thursday and scored a big reversal and saw follow through Friday,” he says.
Can cattle continue to move higher? Frye says technically the market is looking strong but it is end of the month so he is watching for some profit taking as a result.
