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Weekly Wheat Review

From a fundamental standpoint there are reasons to be friendly to the wheat market. But wheat is a market that follows trends and trends follow charts and those charts are bearish right now.

Futures at all three exchanges broke spring rally support lines this week. That suggests a test of those lows soon and a break to harvest lows.

To be sure, that harvest may not be all that great. I've included a couple scenarios for new crop production in this week's supply and demand tables, and the bottom line doesn't vary that much. Ending stocks look like they'll tighten a little, even without uncertainty over spring wheat added in. Still, wheat is a world market, which is why it follows those trends. Production in the rest of the world is also a bit iffy, but there aren't any horrendous trouble spots, either.

Argentina is dry, and that doesn't seem likely to change as seeding begins. Eastern Australia, however, could get moisture for planting just in time in the coming week.

Even less competition in the export market may not bring exports that are all that better however. End users in the Middle East remain in turmoil, keeping preseason sales slow. That could change in a hurry if panic buying emerges, if these countries can get financing.

Until the spark is present, however, the path of least resistance is lower. The bottom's is not likely to be a crater, thanks to tight corn supplies this summer that should help create a floor. But mounting rallies also may be difficult.

We previously recommended getting protection in place for bushels above Revenue Protection guaranteed levels, supplementing these where needed with Chicago July $7 puts. Those options are working into the money. Hard red winter wheat producers should also be looking to make sales if needed, with their prices near RP guarantees. While conditions on the Plains favor rallies, protecting non-insured bushels is still prudent.

Download the complete Weekly Wheat Review report using the link below.

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.