Some profit taking in wheat overnight and today....Alot of people were asking why is wheat up so much yesterday...here is the analysis from our commodity researchers from last night.
Take care,
Joe Dales
Farms.com
Fireworks in the Grain Markets.
By Mike McFarlane, Commodity Research Analyst, Farms.com Risk Management.
Fireworks have hit the grain markets overnight and this morning.
The grain markets have exploded the past couple of days, accumulating in breakouts across the board today. The leader of the grain market has definitely been wheat.
We are seeing a short covering/ hedge buying rally spurred by global supply fears and the prospects of losing acreage this fall. The fundamentals for US wheat are bearish and will remain bearish for sometime possibly into the 2011/2012 year, but the market knows wheat acres will be lost this fall. One way of altering the fundamentals is through stronger demand digesting the supply. In order to spur demand the US needs to regain competitiveness by global wheat supplies tightening and a weaker US dollar. Issues arising in: Western Canada, Europe, Australia, and Russia are driving this rally. Russia is declaring the worst drought seen in nearly a decade and production is expected to drop drastically. The current global supplies are seen as adequate, but the ongoing weather conditions are leading many to believe they will get much tighter as yields are at risk. This is huge as the Russian market has dominated global trade over the past year and half.
The US dollar has nicely corrected back to $82-$83 which is also helping support commodities as a lower US dollar makes US commodities lucrative on the global stage. The prospects of lower supplies globally and a lower US dollar has spurred the short covering rally and finally we are seeing hedge funds starting to buy the grains.
The hedge fund story is not only in the wheat market, but looks to be across the board. A recent release by Goldman Sachs may be helping support further fund buying. Goldman Sachs announced they were raising there 3 month outlook estimates for corn to $3.50-$4.00 and the 6 month outlook from $4-4.50. Funds on the day were net buyers yesterday with approximately 10,000 contracts. An announcement by Goldman can spur the hedge funds to rethink their portfolio’s and possibly add to their corn positions which may very well be happening today.
Finally, adding the positive pressure to the corn and bean market is a weather premium. The weather outlook is adding to the support as the forecast across the Midwest is showing extreme heat, which would put stress on pollination; the most critical stage of this years corn crop. The market is well aware that any yield reduction to either corn or soybeans would tighten ending stocks significantly after the recent cut in acres released in the June acreage report. The fireworks have started in the grain markets, will this last or will it be short lived. The market is showing a lot of strength, but wheat is the only one of the three commodities with a significant breakout. Corn and soybeans will see pressure at $4.04 and $9.83/bushel respectively. Weather premiums can spark fireworks…..but fireworks don’t last forever!
This article is for informational purposes only. The statements contained herein are based on material believed to be reliable, but are not guaranteed to be accurate or complete. The opinions and comments expressed in this e-mail represent the opinions of the commentators--they do not necessarily reflect the opinion of Farms.com. This e-mail is not intended to provide individual financial, tax or investment advice to anyone. Particular investment or trading strategies should be evaluated relative to each individual’s objectives. Farms.com will not be liable for any errors or omissions in the information, or for any damages or losses in any way related to this newsletter. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any securities, futures, or options. Futures’ trading involves substantial risk, may result in serious financial loss, and is not suitable for everyone. Any trading decisions that you may make are solely your responsibility.
Take care,
Joe Dales
Farms.com
Fireworks in the Grain Markets.
By Mike McFarlane, Commodity Research Analyst, Farms.com Risk Management.
Fireworks have hit the grain markets overnight and this morning.
The grain markets have exploded the past couple of days, accumulating in breakouts across the board today. The leader of the grain market has definitely been wheat.
We are seeing a short covering/ hedge buying rally spurred by global supply fears and the prospects of losing acreage this fall. The fundamentals for US wheat are bearish and will remain bearish for sometime possibly into the 2011/2012 year, but the market knows wheat acres will be lost this fall. One way of altering the fundamentals is through stronger demand digesting the supply. In order to spur demand the US needs to regain competitiveness by global wheat supplies tightening and a weaker US dollar. Issues arising in: Western Canada, Europe, Australia, and Russia are driving this rally. Russia is declaring the worst drought seen in nearly a decade and production is expected to drop drastically. The current global supplies are seen as adequate, but the ongoing weather conditions are leading many to believe they will get much tighter as yields are at risk. This is huge as the Russian market has dominated global trade over the past year and half.
The US dollar has nicely corrected back to $82-$83 which is also helping support commodities as a lower US dollar makes US commodities lucrative on the global stage. The prospects of lower supplies globally and a lower US dollar has spurred the short covering rally and finally we are seeing hedge funds starting to buy the grains.
The hedge fund story is not only in the wheat market, but looks to be across the board. A recent release by Goldman Sachs may be helping support further fund buying. Goldman Sachs announced they were raising there 3 month outlook estimates for corn to $3.50-$4.00 and the 6 month outlook from $4-4.50. Funds on the day were net buyers yesterday with approximately 10,000 contracts. An announcement by Goldman can spur the hedge funds to rethink their portfolio’s and possibly add to their corn positions which may very well be happening today.
Finally, adding the positive pressure to the corn and bean market is a weather premium. The weather outlook is adding to the support as the forecast across the Midwest is showing extreme heat, which would put stress on pollination; the most critical stage of this years corn crop. The market is well aware that any yield reduction to either corn or soybeans would tighten ending stocks significantly after the recent cut in acres released in the June acreage report. The fireworks have started in the grain markets, will this last or will it be short lived. The market is showing a lot of strength, but wheat is the only one of the three commodities with a significant breakout. Corn and soybeans will see pressure at $4.04 and $9.83/bushel respectively. Weather premiums can spark fireworks…..but fireworks don’t last forever!
This article is for informational purposes only. The statements contained herein are based on material believed to be reliable, but are not guaranteed to be accurate or complete. The opinions and comments expressed in this e-mail represent the opinions of the commentators--they do not necessarily reflect the opinion of Farms.com. This e-mail is not intended to provide individual financial, tax or investment advice to anyone. Particular investment or trading strategies should be evaluated relative to each individual’s objectives. Farms.com will not be liable for any errors or omissions in the information, or for any damages or losses in any way related to this newsletter. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any securities, futures, or options. Futures’ trading involves substantial risk, may result in serious financial loss, and is not suitable for everyone. Any trading decisions that you may make are solely your responsibility.