Here's an article that isn't so short-fund biased: http://www.agriculture.com/ag/story.jhtml?storyid=/templatedata/ag/story/data/1190663906220.xml Louise Gartner: Wheat market fights bears By Louise Gartner Market Analyst 9/24/2007, 2:54 PM CDT The wheat markets are clearly showing that they are not ready to roll over just yet. The choppy price action over the last several sessions has seen plenty of aggressive selling, only to find buyers waiting in the wings and eager to take advantage of the pullbacks. For two weeks now, the price activity has been a combination of quick moves in both directions, filled in by directionless trading that keeps us rangebound and unable to maintain momentum in either direction. And so we continue to hover just below the $9 mark on Chicago Dec, waiting for the next big event to knock the market out of its comfort zone. Of course, that would depend on developments in Australia's crop and the pace of export demand here in the US. Australia continues to see their wheat crop wither, with production estimates falling further as every day goes by. The latest projections are suggesting a 12-13 MMT crop, down from ABARE's 15.5 MMT just a week ago. Continue article -------------------------------------------------------------------------------- ADVERTISEMENT -------------------------------------------------------------------------------- Rains have not materialized in key growing areas of Australia and producers are abandoning hopes of harvest and looking to graze or hay the crop in many of the eastern growing regions. Western Australia looks to be their best hope, and even there the rains have been spotty and barely enough to keep the moisture base ahead of evaporation. Export demand continues on its blistering pace, with another impressive sales week of 1.6 MMT, again higher than trade expectations. Yes, the weaker dollar is helping but it's still comes down to the fact that world supplies are record tight, Australia is losing another crop and the US is about the only game in town. Russia announced a barley export tariff and suggested that they would release government wheat stocks if domestic prices got too high. Iraq bought 500 TMT of wheat; 400 US hrw and 100 Canadian. Just days later, they announced another tender. They, too, are watching events unfold in Australia, one of their major suppliers, and are taking steps to insure adequate supplies down the road. Buyers have been forced to front-end load their purchases as a result, hence our breakneck pace of export sales despite record high prices. At what point the buying stops is anyone's guess. While Argentina will be able to fill some of Australia's void, most of their exports will still go to Brazil. After that, the next major exporter's harvest won't be until next spring which is a very long wait for those needing to buy and already in short supply. While the wheat market has shown signs of cracking, the dam has not been broken yet. I still think Australia holds the key to near term price action and until the market can get a better grasp of production from them, it will continue to fend off the bears. That production number will be known in just a few short weeks. Informa released their acreage estimates last week, with total wheat plantings up 2.1 million acres to 62.6 million; that's after a 3.3 million acre increase in wheat plantings last year. Corn will lose about 4.7 million, soybeans gain 4.8 million and cotton lose 900,000. It's also possible that even after the market knows those numbers, that we really don't break all that much until the market feels comfortable with the crops in India or Pakistan, or even waiting until the US crops is better know. Despite an increase in planted acres and good planting conditions, with stocks this tight we could well see the market protect what's left until the new crop is assured.
Any thoughts about that slaughter of a close? Anyone think the complex will be bought up again tonight AH?
Heard from a pit trader in the bean pit that this was one of the first times that you could sell the beans on the close and actually buy em back lower than where you sold em! Wheat also broke really hard at the close but I think we could trade substantially higher tonight. Can't support the 900 level but with minni and kc breaking new highs I think chicago will follow. Seem to be in a range with this wheat and can't push for new highs but can't push lower eather. I think we might see this range for old crop contracts until we reach harvest next year. July contract is going to get killed with massive producer selling going to come into this market. Farmers are saying hell I can get 600 wheat right out of the combine when in past years I might be lucky to get half of that right at harvest. selling july/dec08 might be the best thing to do.
Problem with shorting wheat is that the Dec07, Mar08, and May08 contracts may go to the moon and stay there. Then July08 comes in at $3-$4 less and its rollover time for the shorts: buh-bye shorting opportunity; hello mondo realized losses!
I'm an Ag noob, so let me ask a pretty dumb question: Why does July08 Wheat fall off so sharply? Corn and Beans don't fall off like that. Is it because the shortage in Wheat is short term b/c of the poor Australian crop?
not too deep in ag myself, i think it has to do with -known- acreage allocation and production times. Winter wheat harvest takes place around June (it looks like from some stuff I've read), so it takes the market knowing more precisely what supply the market will have up til about mid-08. After that, allocations are uncertain. Hell, farmers could go apeshit planting wheat, get great weather, and drive Sep-DEC08 down to 3.00 if they wanted to. Taken here. http://www.usask.ca/agriculture/plantsci/winter_cereals/Winter_wheat/CHAPT10/cvchpt10.php Thermal Time Requirements For Wheat Production The heat unit requirements to produce a mature crop are approximately 1550 for spring and 2200 for winter wheat. Translated into calendar days, this means that it would take 103 (103 x 15 = 1545) days to produce a spring and 147 (147 x 15 = 2205) days to produce a winter wheat crop if the average daily temperature was a constant 15°C.
So, if the nearby wheat sells off, it will make planting it a little less attractive, so the 08 prices should rise a little?