Given that Wheat continues to push to record highs, I'de be interested to know what the swing long traders are using as profit targets? Under normal circumstances I would use the Upper Keltner channel or Bollinger Band as a first target and then some 'obvious' level of resistance as a secondary target (double top etc), given the lack of these with Wheat I'm resorting to fib exensions but the 127 extension is so far away from the current price that it doesn't make logical sense. Any ideas?
Wheat surpassed $9 a bushel for the first time as a drought in Australia and Canada cut production, pushing global stockpiles toward a 26-year low. The U.S. Department of Agriculture today cut its estimate of Australia's wheat crop to 21 million metric tons from last month's estimate of 23 million tons. Some analysts expected the USDA forecast to show Australian production would be as low as 15 million tons. Canada will produce 20.3 million tons, a 5.6 percent drop from August's estimate, the USDA said. Increasing demand from Egypt to India and weather damage to global crops have driven up prices in Chicago by 79 percent this year. Users including Kellogg Co., the biggest U.S. cereal maker, General Mills Inc, Sara Lee Corp. and PT Indofood Sukses Makmur, the world's biggest producer of instant noodles, are responding by raising prices, fueling inflation. ``The market is in a real frenzy,'' said Tobin Gorey, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``It's feeding through to the consumer.'' Wheat for December delivery rose 8.75 cents, or 1 percent, to $8.9925 a bushel at 10:40 a.m. on the Chicago Board of Trade, after earlier reaching $9.1125 in overnight trading. The most- active contract has more than doubled in the past year. Egypt, Jordan, Japan and Iraq plan to buy 460,000 tons of wheat. India is seeking to import 5 million tons this year to replenish its inventories. The grain, used in livestock feed, noodles, cakes and bread, trades in 60-pound (27.2-kilogram) bushels, each with enough grain to make 73 loaves, according to the Web site of Lake Oswego, Oregon-based bread.com. Global Rally Milling wheat for November delivery on the Liffe exchange in Paris rose 3.75 euros, or 1.4 percent, to 279 euros ($387) a metric ton as of 5:13 p.m. local time. That's equal to $10.53 a bushel. Prices have doubled in the past 12 months. Prices have gained 84 percent this year and climbed to a record 285 euros on Sept. 6. On the South African Futures Exchange in Johannesburg, wheat for December delivery rose 65 rand, or 2.1 percent, to close at a record 3,242 rand ($452) a ton. Rising prices of food, from wheat to milk and pork, are stoking inflation at a time when traders expect the U.S. Federal Reserve to cut interest rates to bail out the housing market and avoid a recession. China's inflation rate accelerated to a 10- year high in August, fueled by food prices. ``When you look at grains prices from a historical perspective, they're actually not that high,'' Daniel Edzes, who grows sugar beet, grains and potatoes on his 50-hectare (120- acre) farm in the north of the Netherlands, said in an interview today. ``Wheat prices right now are trading at about the same level as when I first started farming 35 years ago.'' Smaller Australia Crop The harvest in Australia, forecast by the USDA to be the world's second-largest wheat exporter this year, may be as low as 15 million tons, Rabobank Group has said. The government forecaster, the Australian Bureau of Agricultural and Resource Economics, estimated the crop in June at 22.5 million tons, more than double last year's drought-damaged total of 9.9 million. Its next update is scheduled for Sept. 18. Dry weather in central and southeast Australia may persist in the ``short-term'' as cooler ocean temperatures restrict the formation of rain-producing clouds, the Melbourne-based Bureau of Meteorology said today. ``Australia's not going to have a good crop, we know that,'' said Tom Leffler, owner of Leffler Commodities LLC in Augusta, Kansas. The country's crop may still thrive if enough rain falls in the next 30 days, he said. ``I'd be cautious about writing Australia off.'' Declining Inventories Global wheat supplies are expected to decline to 112.4 million tons by the end of the marketing year on May 31, 2008, the USDA said today in Washington, down from last month's estimate of 114.8 million tons. The U.S. is the world's biggest wheat exporter. Barley prices in Winnipeg, Canada, gained 41 percent in the past year on increased demand for animal feed and for brewing beer. Canada is one of the world's biggest barley producers. Corn has gained 53 percent in the same period, as demand for grain-based ethanol surged. Downers Grove, Illinois-based Sara Lee, maker of the bread of the same name and Jimmy Dean sausages, said yesterday it will keep increasing prices to cover higher commodity costs. Australian Agricultural Co., the nation's biggest rancher based in Queensland, said cattle prices will need to rise. Premier Foods Plc, the U.K.'s biggest producer of cakes and instant soup, on Sept. 4 said it may further increase prices for its Hovis bread brand and other products. ``There's not a lot they can do about it,'' Jonathan Banks, an analyst at ACNielsen in London, said in a Sept. 10 interview. ``They're getting a big hit. They have to put the price increases through because it's not an inherently profitable category to begin with.'' Asian Food Prices Indofood Sukses Makmur, based in Jakarta, will increase flour prices in each of the next four months to pass on costs, Franciscus Welirang, vice president-director in charge of the flour division, said by phone today. Japanese bakers and millers are studying price increases. ``Flour prices will rise in the near future and we are considering raising prices for our products,'' said Fuminao Wake, a spokesman for Yamazaki Baking Co., Japan's largest bakery. Nisshin Seifun Group of Japan, a miller, is considering raising flour prices for the second time in six months, after an increase in May that was the first in 24 years.
Very useful information re-inforcing my bullish outlook for Wheat - although (with respect) not really providing me with insight into what kind of upside price you would set your target at?
Price targets? Use "round" numbers, i.e. even-dollars, half-dollars, quarters, dimes, nickels, even-pennies and odd-pennies.
You wont have to worry about resistance levels much longer. Wheat down 15 again after huge export numbers!
In all honesty (and I've lost boatloads trying) there's little technically that'll give you a reliable level in a runaway bull market. The fib extension that ultimately works may wind up being the extension derived from another move all together. I've tried to "justify" certain highs for example in AAPL with zero luck........
In the hindsight 950 was a good resistance level Right now everybody's running for exits and 830 seems to be the support level
What do you think of Selling Dec07 wheat and buying July08 wheat? The spread is very large, and seems to be coming in. Plus if the near month goes down, there will probably be less planting, and therefore less supply in the July 08 crop. Just a thought.
You want reasons NOT to do that? The December, March and May will still be well-supported on breaks. The July is vulnerable to falling hard because of increased plantings and good weather. The old-crop new-crop spread trades more like an outright. 10 lots of December versus 10 lots of July performs like ~7 lots of December outright. It might be a little "safer" to do May versus July if you can tolerate the illiquidity of the May until the end of Winter. I'm holding out hope for a big hedge fund or commercial user to attempt to corner the market between now and Spring-08.
Thanks- I'm new at ag commodities, so I don't have a good grip on how large or small these spreads have been. What is the "normal" old crop-new crop spread, or is there even a normal? For spread trading, should one mostly focus on two expirations in the same crop? Good Luck, Good Trading.