I've been trading wheat small from the long side but now going to make it a big position. Keeping it on a fairly tight leash though. If it doesn't start turning again within the next 2 weeks then I'll abandon the position. Don't ask about fundemantals cuz I can't find a bullish crop report.
if you look at the sell off in option premiums the volatility in the market seems rather sluggish. With a good size crop underway in India and the nice weather for the US spring wheat harvest i don't think there is too much upside potential left. My short call spreads are all but worthless now which is money in the bank. Wheat's been more and more eratic since the switch over to the electronic platform and it has become an interesting market to trade.
You may want to wait for a re-test of the May-2008 lows coinciding with a well-defined seasonal bottom towards the end of August before the market can rally into February-2009 with all the potential/expected bad crop news. We'll see how it plays out.
Totally agree with Caroy... bumper crop not just in India, US. Globally it's a bumper harvest - Europe, FSU etc. Also one gotta be careful, Wheat traded on CBOT are SRW which is the one with the best harvest. It's the HRW and DNS traded on the kansas exchange and mineapolis that are more bullish.
Yes there is a bumper crop, a buddy of mine that grows protein wheat down in Sterling said it's looking good. they got an inch and a half of rain today. with that said we are still at EXTREMELY low stocks and the rebuilding process will be multi year, Id get long some bull spreads vs. outrights. march/july was a fucking cash cow of all cash cows last year. good trading
I would be very careful when comparing the wheat situation this year to last year-completely different situation. You have to understand wheat is the one crop that can be grown pretty much anywhere around the world-allowing us to cure a tight stocks situation in one year, which is exactly what is happening. This was a perfect example of a market at work-prices went high enough to encourage production expansion around the world and this time the weather cooperated for the most part, unlike last year when many major wheat producing countries faced weather/production issues. Wheat is the least bullish from a of the big three (corn, beans, wheat) from a fundamental standpoint.
Agree! It's Beans, followed by corn and wheat. A less riskier way to play this out would be to long the MW and short the W.
there are such low stocks right now that Wheat is severely prone to an upside push. The commercials will be aggressively buying all year IMO. I know that the crop is bumper and all is looking good but we are still so low on stocks. I get nervous bout taking outrights so thats why I will just spread it.
Stocks were historically tight coming into this harvest, which is pushing its way toward completion (winter wheat). THe USDA actually upped 07/08 ending stocks on their July report, coming up to 306 million bushels vs. 254 mil on the June report. The 08/09 ending stocks projection of 537 million bushels is not tight nor is it overly burdensome. Comfortable would probably be a safer word. Commercials are not making an active buying push right now because for the first time in a year they don't have to-there is plenty of wheat around. We saw the protein scale in Kansas City slip WELL over a dollar into the heart of harvest. 13 pro basis in Kansas City is now about $3 weaker than it was late last winter in the heart of the rally. The wheat play comes when it is time to talk acres this fall. Depending on where corn and bean prices are, wheat may have some work to do to garner enough acres come planting time. The other wildcard is CRP should the Govt. decide to grant early release. Those are acres much more suitable for wheat than corn or beans.