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Kansas Wheat Innovation Center

Market Analysis: Wheat Price Action is More of the Same

Oct 31, 2012

The wheat price did it again. On Wednesday, bullish wheat traders drove the price higher in early trading only to give up some of the strong gains by the end of the session. The rest of the week, the wheat price caught spillover pressure from a sharply lower corn and soybean market. By the end of the week the December Kansas City wheat price gained 1 1/4 cents over last week’s close.

For the last 3 1/2 months, the wheat price has stayed in a range as illustrated by the December Kansas City wheat chart. Historical high prices have kept a lid on this market. As the wheat price has reached the top of the price channel, wheat exports vanish. Demand and more so, hope for demand finds willing buyers on breaks. These buyers are both commercials and speculators. This sideways trading pattern will likely continue until the first of the year.

Wheat export demand from the United States should see some improvement after the first of the year. Some major world wheat exporters will run out of wheat or price themselves out of the market. The Ukraine government confirmed this week a ban on wheat exports starting November 15. Commercials in this country have booked 5.44 million metric tons of wheat; their allotment was 5 million metric tons. Some wheat buyers will have to scramble to fill their shortfall. Additional countries in this region have slowed down wheat export by pricing themselves out of the market.

Competition for world wheat business has moved to Europe, Argentina and Australia. Our wheat price is inching closer but freight advantage for the North African Countries keeps France in the market. Wheat exports from the United States should improve in the early part of 2013but wheat inventory is plentiful and many wheat importing countries will have most of their needs met.

Wheat producers should have your 2012 wheat crop sold. Producers should start on marketing next year’s wheat crop. Dry conditions have supported the July Kansas City wheat price on the board. Rain or snowfall will erase some wheat premium. Producers should take advantage of the $8.00 plus cash wheat price.
 

Tom Leffler
Leffler Commodities, LLC
2901 Lakeshore Drive
Augusta, KS 67010
866-468-6866

Larry Glenn
Frontier Ag
Quinter, KS
785-754-3348

PLEASE NOTE THAT THERE IS AN INHERENT RISK OF LOSS ASSOCIATED WITH TRADING FUTURES AND OPTIONS CONTRACTS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTIONS CONTRACTS. FUTURE’S TRADING IS NOT SUITABLE FOR ALL INVESTORS. OPTIONS CAN AND DO EXPIRE WORTHLESS. IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIMUM AND OF ALL TRANSACTION COSTS.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST SEVERAL YEARS. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAYAFFECT THE RESULTS.

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