FOLLOW US 
03-12-10: Wheat Sinks to New Contract Low
Reacting to the release of the monthly update by the USDA, the new crop wheat contract in the Kansas City market made a new contract low on Thursday before a small recovery on Friday. The wheat stocks in the United States and the World continue to inflate.
The USDA in their March Supply and Demand Report released on Wednesday raised ending stocks in the United States by 20 million bushels. They left their export number unchanged but lowered domestic usage by 20 million bushels. Ending stocks in the United States are at one billion bushels. This is the largest ending stock number since the June 1988 report. Many analysts predict the export number in future reports will drop and the ending stock number will increase. World ending stocks for wheat increased 900,000 metric tons.
The shifting of wheat demand out of the United States reflected in the data from the Former Soviet Union countries. Their wheat production in 1994-95 was 60 million metric tons. In 2008-09, this country produced 116 million metric tons. They have produced a surplus and are now the major competitor for world wheat exports. Their location in the world is a sizable advantage over the United States since most of the wheat importers are in their area. In the mid-70’s, the United States had 50% of the world wheat export business. This year, we will ship 18% of the world total. This would be a 38 year low for the United States. This shows the drag on the wheat price is on demand side of the equation for the United States.
The positive side of the wheat market lies in the drop in winter wheat acres and the oversold condition found on the charts. There is little talk about the large drop in winter wheat plantings in the United States, as the moisture profile is good. The weather needs to stay ideal for a second year of high wheat production. Freeze, heat and a lack of moisture at filling time could chip away at yields. If one was just a chart trader, the trend indicator is at the bottom of the graph and throws up a caution flag. The wheat price is due for a bounce. The recommendation for producers is to take advantage of a spring rally and move some grain. Sell remaining old crop inventory and forward price some bushels of new crop.
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 MAY AFFECT THE RESULTS.
02-26-10: Wheat Stuck in a Pattern
The wheat price action established a pattern this week. Monday’s was up, Tuesday down, Wednesday up, Thursday down and Friday, the price closed higher. To end the week, the price settled at the high end of a sideways trading pattern on the charts. The price action was positive but the fundamental news leans to the negative side.
On the demand side, the weekly export sales report of 409,000 metric tons was in the middle of the range of estimates. Only thirteen countries purchased wheat. Nigeria bought 206,000 metric tons with hard red winter wheat their major choice. The United States is the source for quality wheat. If price is the determining factor, wheat importers will source their wheat purchases from the Black Sea Region. Taiwan issued a 41,000 metric ton wheat tender for U. S. wheat on Friday. Still no word on the Iraq wheat tender that bids were due on Wednesday.
The International Grain Council raised the estimate by six million metric tons for 2010 world wheat production. The good news was their estimate is 16 million metric tons below last year.
Wheat deliveries against the March contract started on Friday. Contracts totaling 1,313 delivered against the Chicago March contract. This was a smaller number than the trade expected and provided a small amount of support. The major supportive factor for the wheat is the sell off in the U. S. dollar.
Producers should be using this rally to forward-price some bushels. Forward pricing should be done in increments until a confront level is achieved. Finish your price protection with the use of futures or put options, which ever fits your risk tolerance.
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 MAY AFFECT THE RESULTS.
02-19-10: A Wild Week for Wheat
The wheat market is in a sideways trading pattern. The fundamental news leans to the bearish side but the price has held support. The bearish fundamental news is now history. The current price should account for the large supply and slow demand in wheat.
On Friday, the U. S. made a current market high since last June. Problems in the European Union and the U. S. Fed raising the discount rate for banks pushed our dollar to new recent highs. This is a bearish factor for wheat exports but the wheat market ignored the news on Friday. The action in the dollar is loosing some of it’s affect on the wheat price action.
The Annual USDA Outlook Forum concluded on Friday. The USDA projected wheat planted acres at 53.8 million acres. This is a drop of 5.3 million acres from last year. Winter wheat plantings are the lowest since 1913. Despite the low acreage, they are optimistic about production and therefore showed only a small drop in ending stocks.
An important factor for producers is the seasonal patterns for the wheat price. Granted, past results do not guantee future action but it does show a tendency for price swings. Wheat can rally in the late March and early April timeframe. A second rally can occur in May prior to harvest. If these rallies occur, producers should use the advance in price to market a portion of your expected production. The suggestion is to use futures or cash forward contracts on the early rally and put options during a pre-harvest rally. For specific recommendations, give us a call.
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 MAY AFFECT THE RESULTS.
02-12-10: Rally and Fail Week for Wheat
Wheat futures started the week with a gap higher opening and set new highs for the move on Wednesday. Funds holding a large number of net short positions exited some of the position on Wednesday when the price traded above the last reaction high. The technical indicators had crossed to the upside and the trend had reversed. The trade was starting to believe a rally was in progress. That technical buying dried up on the last two days of the week. The weak close on Friday put a hook in the stochastic indicator at mid range. This technical action took most of the wind out of the sails for the bullish traders.
This week’s rally was strictly a technical rally. The fundamentals did not change. On Friday, the U. S. dollar posted a new high for the move. Financial problems in Greece and tightening of China’s monetary policy are the reason for the rally in the U. S. Dollar. This in turns is a negative affect to wheat price. In addition, the world is full of wheat and demand is steady.
The weekly export sales report delayed until Friday listed a total of 578,000 metric tons. This was above the high end of the range of estimates. No single sale totaled over 70,000 metric tons but twenty-two countries purchased wheat. Since the wheat is in a demand driven market, this number needs to increase for the wheat price to advance.
For producers holding old crop inventory: continue to hold wheat and wait for a spring rally. The seasonal tendency is for a rally in the early spring. For new crop, be prepared to add to forward priced sales if we experience the spring rally. With six million less winter wheat acres, the weather when wheat comes out of dormancy is important. If we see a freeze scare rally, add to or begin to lay off some hedges.
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 OPTION CONTRATCS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTION 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 PREMIUM 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 MAY AFFECT THE RESULTS.
02-05-10: It’s Time for a Turnaround
After three weeks of lower prices, one starts to believe that their will never be another good day. Bearish fundamental news comes across the news wires in large, bold print. Pages of information illustrate the large supplies and sluggish United States wheat demand. After a time, one starts to believe that wheat prices will never recover. The wheat market could have established their low for the move this week if the saying is true that all the bad news comes out at the bottom.
Reviewing the market action in the outside markets the last half of the week gives a hint that the selling for the short term has subsided. The U. S. dollar gained over 150 points. The crude oil market lost over $6.00. The gold market lost $60.00 an ounce. In addition, the silver market lost over $2.00 an ounce. In normal times, this type of negative influences from the outside markets would have sent the wheat market sharply lower. Instead, the wheat price stabilized the last two days of the week. The March Kansas City wheat contract has a double bottom made the last two days. It is time to keep a close eye on the charts to see if this support point holds.
The USDA will release their February grain update next Tuesday. Look for minor adjustments in their ending stock number. They adjusted their export estimate last month so the trade expects the report to be neutral. The weekly sales totaled 418,000 metric tons and in the middle of the range of estimates. Twenty-two countries purchased wheat with Mexico securing 196,000 metric tons. The Agriculture Outlook Forum by the USDA is on the calendar for February 18 and 19. This forum will issue their first outlook for the 2010/2011 crop year. With a projection of six million less acres, wheat production will decrease and weather as wheat comes out of dormancy will have a major affect on price.
Producers should use a decent rally in the next three months to extend their coverage on new crop wheat production. The seasonal tendency is for a high during the last part of March or the first part of April. Sometimes as secondary rally occurs in May.
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 OPTION CONTRATCS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTION 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 PREMIUM 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 MAY AFFECT THE RESULTS.
1-29-10: Wheat Prices Continue Slide
Remembering as kid sliding down the slipper slide and how much fun it was. The recent slide in the wheat price although in the same direction, has no comparison. The reality is the price may not be at the bottom and many producers have scraps and bruises. A larger than normal amount of old crop wheat is still in producers hands. Producers have a limited amount of forward pricing of next year’s wheat crop. The common question from producers is, now, what do I do.
The answer, sit tight. The wheat market feels like we are in a hole. Most of the fundamental news sounds bearish but many times the news chases the market. If we put faith in seasonal tendency, the wheat market has a better than average chance of rallying in late March or early April, just as wheat comes out of dormancy. Freeze scares have a positive affect on price during this time of the year. Producers should be prepared to re-act to these volatile price actions. Open orders are a good way to catch a desired price when producers are not in front of the screen. These open orders can be place with a commodity broker or a grain elevator depending on your marketing strategy. If a secondary rally occurs in May, one should extend their coverage. Put options are a good choice for the secondary rally using the September Kansas City Wheat contract. Wheat has a strong seasonal of selling off during harvest and into the early part of August so pricing ahead of harvest is important.
With six million less Winter wheat acres planted in the United States and four per cent less All Wheat acres in Canada, weather will become an important factor. Wheat producing countries are full of wheat but one bad year of wheat production would take away our surplus.
Demand is the key for a turn around in the wheat price for the short term. Keep a close eye on the weekly export sales reports. Demand is improving the last two weeks but we need to keep the momentum going. The top five U. S. wheat buyers for old crop U. S. wheat are Nigeria, Japan, Philippines, Mexico and South Korea. Egypt has dropped out of this list. If the demand improves then the drop in price has fulfilled its function in the wheat market and the price action will reverse.
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 OPTION CONTRATCS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTION 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 PREMIUM 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 MAY AFFECT THE RESULTS.
