Tuesday, April 13, 2010

Wheat: "Have we turned the corner in grains?"

Wheat was up for the second consecutive day. From Bloomberg via BusinessWeek:
Wheat Futures Climb as Speculators Unwind Bets on Market Slump

Wheat rose for the second straight day as some speculators unwound bets on a market slump after futures failed to drop below a widely followed price-chart level.

The grain remained above the 10-day moving average of $4.7625 a bushel, supporting prices, said Mike Zuzolo, the president of Global Commodity Analytics in Lafayette, Indiana. Wheat has climbed 5.3 percent this month.

“When we hit the 10-day moving average, it initiated a buy signal,” Zuzolo said. “We may be getting some support from fund short-covering.”>>>MORE

From OptionsExpress:

Is The Bear Market In Wheat Futures Grinding To A Halt?


Since the beginning of March of 2008, new crop July wheat has been in the midst of a major bear market, as prices have fallen by nearly 60% the past two years, as the all-time high prices reached in 2008 encouraged producers worldwide to increase wheat production. However, now that wheat prices have moved towards more “reasonable” levels, there are some signs that U.S. export demand may begin to increase. U.S. weekly Wheat export sales totaled 323,700 tons for the 2009/10 crop marketing year, which is well above the 117,000 tons needed each week to reach the USDA expected totals for this year. The rise in exports comes despite a rising U.S. Dollar, which would make U.S exports more expensive to foreign buyers. The USDA in its April Supply/Demand report lowered 2009/10 U.S. Wheat ending stocks by 51 million bushels to 950 million bushels. The USDA also lowered world wheat carryout totals by 1 million metric tons to 195.8 million tons. Although the decline in both U.S. and world wheat ending stocks should be viewed as supportive to wheat prices, traders still acknowledge that U.S. wheat ending stocks are at 10-year highs. Large and small speculative accounts are holding net-short positions in Chicago Wheat futures totaling a combined 69,032 contracts, as of March 30th. However this net-short position has begun to decline, as some of the large commodity funds have started to cover their short positions — especially as prices have rallied off contract lows the past several day. However, some analysts believe that any rally in July Wheat futures will be short-lived, as U.S. wheat producers will take advantage of a rise in futures prices to hedge current production ahead of this season’s harvest....MORE

From AgWeb, the headline story:

Have we turned the corner in grains? Or are we still headed down? No, and No. As of today’s close, corn is the least enthusiastic prospective bull, and it is not looking like a bear. Sure, there is no surprise here: we are into the time of year where things get dicey. But don’t you wish there were no surprises in the grain business, or at least no bad surprises? The chart says (and the charts generally know – it has to do with something physicists call self-organizing critical mass feedback loops) corn is undecided but more bullish than bearish.

Another non-surprise is that the bean chart thinks beans are teetering on the edge of a bull market. A week of prices above 984 basis July should do it. That’s not a prediction for $15 prices, but it is a prediction for prices above $11.

This week’s big surprise is wheat. Wheat has been the unloved step child of the group, but is now looking more bullish than corn. On the other hand, unless the world’s wheat supply suddenly collapses, it isn’t clear how we will get much above $6.50 - $7.00 this year, and we may not do that well. One more day of advances will set 470 basis July as the price the bears have to destroy to have any chance to take control of the chart. The bulls will be looking to push prices through 500.

As always, expect two steps forward and one step back until and unless weather gets ugly.