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Market Information from Archer Financial Services and MGEX

Each Wednesday, Brian Henry, Market Analyst for Archer Financial Services (Brian’s Bio), will post a new market article. Readers are encouraged to email Brian with questions and can expect a response within 24 hours.

Short Supplies of Old Crop Spring Wheat Is the Only Story Left in Wheat

The price of old crop Spring Wheat continues to work higher on short supplies.  All other domestic wheat contracts remain under pressure as the marketplace awaits the upcoming of Winter Wheat harvest.

The concerns over the supply of old crop Spring Wheat will play out, but it is going to take time.  There is interest in selling the Mpls. July contract as it approaches a $2.00 premium to the Mpls. Sept contract.  I expect this selling revolves around profit taking on either the July/Sept spread or flat price July.  Based on the tight supplies, I do not expect this contract to be offered very well.  Price action will be determined by the aggressiveness of buyers. Although high profile foreign demand remains light at this point, there is no fundamental reason to be short Mpls. July.  Japan is back in the wheat market this week for and is looking to Canada for Spring Wheat. 

New crop Spring Wheat will remain under pressure as long as the market is focused on the prospects of the domestic/global new crop harvests.  Due to the fact that new crop Spring Wheat is not generating any interest, expect Mpls. to be a follower of the other wheat markets.  Now, the July contract in Chicago probably deserves the most attention.  Today, that contract breached the 200 day moving average of 789 a recent support level.  Trading below this level will continue to generate fund liquidation of long positions.  In Chicago, the market may be approaching levels that will generate a concerted effort by the funds to build a net short position. 

The next down side objectives for Mpls. Sept and Dec contracts are the respective 200 day moving averages of $8.46 ¾ and 8.46 ¼.  If the market trades through those levels, the Sept may find support around $8.30 and the Dec support would be around $8.20 level.  Technical bounces, which have been few and far between, can probably be sold.  I favor selling the Dec instead of the Sept.  If the July contract continues to rally against the Sept, expect the Sept contract to gain on the Dec. Although few areas have received some rain, Spring Wheat plantings remain on pace to be completed on time barring any shift in the weather pattern.  Many western areas would welcome precipitation at any time.

Do you have a question about this article? For a personal response within 24 hours, please email brian.henry@archerfinancials.com.

This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of AFS is strictly prohibited.

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Ask the Analyst Archive

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Can We Count On Argentina To Export - November 23, 2007

Reserve Wheat Stocks - November 28, 2007

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How High Can Spring Wheat Go - January 30, 2008

What's Left To Say About Spring Wheat - February 6, 2008

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Is This Really Happening - February 27, 2008

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Spring Wheat Acres - April 2, 2008

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Is Wheat Going To Be Able To Continue This Rally - April 16, 2008

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The Down Trend Continues For Now - April 30, 2008

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Short Supplies of Old Crop Wheat is the Only Story Left in Wheat - May 14, 2008