Time to start selling out of wheat

you can always buy ZW puts on ECBOT in the night session. the volatility is very high and the b/a spreads are wide, but its a trade with a stop not vulnerable to limit moves (and thus margin call risk).

Maybe a good way to play it is to buy vertical put spreads (ie long 860 put, short 700 put) - that way IV and time decay won't kill you so bad.

 

Also, you can always hedge your position using options, even if it's locked limit.

 

btw, why doesn't the OP just short natural gas or something that is obviously in a bear market.

either that or BIDU... thats a blowoff top.

 

I'm waiting for another Amaranth to come long to help me with a natty short.

ZW can't decide where it wants to go tonight.

 

Well today gave you a little cushion to your short position. Hopefully, you took it yesterday.

 

came off a limit down.. impressive... we'll see where this ends.

wouldn't be surprised to see it go back to 870.

by the way, whats the news today? or is this just fund position shuffling?

 

ZW bouncing off the limit low. May be a head fake, we will see.

Must be the Indo-Banglideshi cabal pounding the wheat so they can get it at a lower price. Those little buggers can get frisky when they are hungry.

 

Sept. 24 (Bloomberg) -- Farmers are sowing the seeds for an end to the biggest rally in wheat since the Soviet Union cornered the U.S. market in the 1970s.

Growers from Kansas to India are preparing the world's largest wheat crop in 10 years, overwhelming demand and refilling barren grain bins. The cereal has risen 78 percent this year, the most of any farm commodity.

Prices will fall 30 percent to $6 a bushel within a year, said James Gutman at Goldman Sachs Group Inc. in London and Pierre Martin, manager of a $490 million commodity fund at DWS Investment GmbH. Chicago futures markets show a similar drop. Hedge funds have curbed their bets on the rally, trimming net long positions in futures and options contracts by 44 percent the past five weeks, government data show.

``Would I buy wheat today? No,'' said Jim Rogers, the chairman of Beeland Interests Inc., who predicted the start of a rise in commodity prices in 1999. ``Wheat has been going straight up for about a year. I don't like to jump on a moving bus.''

Wheat has never been more expensive relative to corn, soybeans and cotton. Rising prices spurred Italian consumers to boycott pasta and bread this month, while South Korean livestock producers reduced imports.

``As farmers expand production, inventories will likely recover, and thus prices would fall sharply,'' said Gutman, whose team anticipated the rally in commodities this year. He recommends buying corn because of demand for biofuels.

$9 Wheat

Wheat for December delivery, the most active contract, rose 1.2 percent to $8.845 a bushel today. The crop reached a record $9.1125 this month on the Chicago Board of Trade after weather damaged crops from Canada to Australia and as inventories headed to their lowest in 26 years. Rising wheat and milk prices fueled a 2.4 percent increase in U.S. inflation this year.

The price of the grain last climbed this fast in 1973 after crop failures forced the Soviet Union to quadruple wheat imports to 15.6 million tons, including about 30 percent of U.S. exports that year.

Farmers will harvest at least 3.3 percent more acres next year than they did this year, said William Tierney, executive vice president at John Stewart & Associates in Washington, a consulting company, and a former U.S. Department of Agriculture economist. Prices will likely fall 50 percent by July, he said.

``Unless you are going to predict a third consecutive year of crop problems, prices for July Chicago wheat futures may fall below $4,'' from $6.29 on Sept. 21, Tierney said. Wheat production worldwide will rise 4.1 percent to a record 641 million tons, he said. A 60-pound bushel holds enough to make 73 loaves of bread.

Buy Corn

Martin of DWS Investment, a unit of Deutsche Bank AG, is reducing his wheat holdings in favor of corn and soybeans, he said, declining to be more specific. Malinda Goldsmith, a partner at Four Seasons Commodities Corp. in Dallas, is selling wheat and buying corn, anticipating a decline in wheat's record premium.

So-called net long positions in Chicago totaled 21,197 futures and options contracts on Sept. 18, down from 37,768 on Aug. 14, U.S. Commodity Futures Trading Commission data show.

``Prices will drop,'' said Park Yang Jin, business manager at Seoul-based Daehan Flour Mills Co., South Korea's largest milling wheat importer. ``Record prices will drive farmers to plant more.''

The surge in grain prices means aid to developing nations from the U.S., the European Union and Australia may drop to 5.5 million tons this year, the lowest since at least the 1970s, said Abdolreza Abbassian, an analyst at the Rome-based United Nations Food and Agriculture Organization. The FAO has recorded riots over food in Niger, Guinea, Burkina Faso and Yemen, he said.

Farmer Incentives

The EU on Sept. 13 unveiled plans for a one-year moratorium on rules that require farmers to leave 10 percent of their land fallow. U.S. farmers, the biggest wheat exporters, have until Oct. 1 to lock in government-funded crop insurance that guarantees a record pre-planting price of almost $6 a bushel at harvest, 50 percent higher than the average of the past two seasons.

Growers in the Northern Hemisphere are seeding crops that may result in the largest harvest acreage in any year since 1997, according to Tierney.

``We'll probably see an increase in the European Union, the U.S., potentially also in Canada, and although it's early to say, Australia and Argentina,'' said Amy Reynolds, a senior economist at the London-based International Grains Council. Wheat plantings rose 2.9 percent to 214 million hectares this season, she said.

Planting More

Farmers respond to high prices with more supplies than in any other industry, said Michael Swanson, senior agricultural economist at Wells Fargo & Co. in Minneapolis. In the past two years, high prices for sugar and corn led to larger-than-expected production and price declines, Swanson said.

Global sugar prices are still falling, 18 months after reaching a 25-year high, as production overwhelms demand and inventories increase. Sugar futures are down 18 percent this year in London and are off 14 percent in New York.

After corn set a 10-year peak in February, U.S. farmers increased plantings by an unprecedented 19 percent to 93 million acres, the most since 1944. U.S. government-subsidized crop insurance guaranteed farmers a record $4 a bushel before any seeds were planted this year, and similar programs will boost wheat acres, Tierney from John Stewart & Associates said.

India, the third-largest importer of wheat last year, is unlikely to buy more because it has sufficient supplies. The South Asian nation bought 1.3 million tons in the past two months, equal to about one of every six bushels harvested in Kansas.

No Imports

``We don't need to import,'' Agriculture Minister Sharad Pawar told reporters in Delhi Sept. 19. ``Our stocks are adequate.''

Prices are so high that livestock producers are reducing purchases and using alternatives.

``We've been buying more corn to replace wheat,'' said Kim Chi Young, purchasing manager with the Korea Feed Association, the country's biggest feed-grain importer. Suppliers offered feed wheat in late August at $424.73 a ton, Kim said. The price was 60 percent more than corn.

General Mills Inc., the second-largest U.S. cereal maker, is raising prices to protect profits. The Minneapolis-based company last week said fiscal first-quarter earnings rose 8.2 percent to $288.9 million, or 81 cents a share.

``We're monitoring the commodity environment very, very closely to see if we might have to pass on some additional costs,'' said Kendall Powell, president and chief operating officer at General Mills, where grains represent about 10 percent of its cost of goods.

Weather Damage

Some wheat investors say poor weather may yet wipe out any gains from additional plantings. A 2.6 percent increase in harvested acreage this year failed to produce more grain after drought in Australia and rains in the U.S. and Europe damaged crops.

``You can plant all the acres you want,'' said Richard Crow, president of Crow Trading Inc., a $40 million agricultural commodity fund in Memphis, Tennessee. ``You still have to have good weather.''

Goldman Sachs's Gutman said wheat today reminds him of the nickel market earlier this year, where prices reached a record in May only to collapse about 50 percent in the next three months. Morgan Stanley's Hussein Allidina, global commodity research strategist in New York, said farmers should sell as much of next year's crop as possible to lock in prices.

``Wheat's a bull that's going to die hard,'' said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa.


http://bloomberg.com/apps/news?pid=20601087&sid=aW1UFrIPPw3o&refer=home

 

Wow...this many bears must mean we are going to double digits..
One month or so left of this bull...better ride it hard....

 

Buy a farm and become a rich farmer.

talk about a old economy revival.