Wheat Prices Rebound Off 4-Year Lows
Today’s Spotlight Market
Spring Wheat crop conditions continue to impress with 70% currently rated good to excellent this past week. Crop conditions traditionally decline during the dog days of summer so the prospects for a large crop look good. Trader?s will be busy squaring their positions this week ahead of the August USDA crop production and supply/demand report due out at 11 am this coming Tuesday.
Fundamentals
Chicago Wheat futures prices have begun to recover from 4-year lows as concerns about the quality of the European Wheat crop combined with decent U.S. exports has weak shorts running to the exits. Rainy conditions in France, in the midst of the Wheat harvest, has analysts concerned that the nation?s crop will be reduced to feed quality which would hurt exports and potentially drive buyers to the United States. 2014-15 Hard Red Winter Wheat exports are running near last year?s levels so far this marketing year, with production down over 5% from year ago totals.?
Although prices have recovered from recent lows, one has to wonder how high prices can go with potentially huge Corn and Soybean crops waiting to be harvested this fall and on farm and commercial grain storage already tight. This could force Wheat producers to sell the recently harvested crop to help make room for Corn and Soybeans. This additional cash market activity could lower the cash basis for wheat as grain elevators face storage issues as well as potential transportation problems as rail cars are in short supply, especially in the Northern Plains, which makes moving grain to ports for export a much more difficult endeavor.? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for September Minneapolis Wheat, we notice what appears to be a bear-flag chart pattern forming. This chart-pattern usually forms in a down-trend and is normally seen as a continuation pattern of the previous trend. Prices have also slipped back below the 20-day moving average, which is turning short-term momentum back in favor of the bears. The 14-day RSI remains weak, with a current reading of 38.47. The ?spike? high of 651.75 made back on July 17th looks to be the next major resistance level for the September futures, with support found at the recent low of 607.25.?
————————————————————————————————
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.