Renewal of Wheat Pricing Discussion

[charliep]

There was a thread below on what to do with wheat basis contracts. In following the futures side, a nice rally to a resistance area for both December and March contracts (MGEX). Lower now.

Thoughts about what to do.

[charliep]

[URL="http://www.farms.com/markets/?page=chart&sym=MWH15"]March MGEX[/URL]

[Braveheart]

We are going to reward this rally with a sale. Won't go nuts on volume. Nearby basis is very strong over Mpls. I like selling into an up market.

Also, we have some non aerated storage and it's a good time to pull some out of those bins. We don't need any quality loss in storage.

[mbdog]

Charlie...should post continuous monthly chart to put dec/march in some context/perspective.

[charliep]

Here is the monthly chart. $6 ish is a fairly critical number both as a resistance area and a support area from a futures perspective.

[URL="http://www.farms.com/markets/?page=chart&sym=MWZ14&domain=farms&display_ice=1&e nabled_ice_exchanges=&studies=Volume;&cancelstudy= &a=M"]MGEX monthly[/URL]

[furrowtickler]

Kansas wheat up sharply his morning , what gives - cold weather ?

[mbdog]

truth is dec basis holders are at mercy of the trade gods, whomever that may be. The 2 plus year?? short of the wheat complex has driven current futures to historically low levels, as seen in the monthly continuous. Would have liked a longer chart Charlie to put prices into larger perspective, because this would clearly indicate wheat market playing with fire. Nothing says we don't grind lower/go sideways here for a while...again at mercy of trade gods. Cash and the basis markets are indicating futures are too low...maybe...and interesting to see recent volatility vibrating wheat futures/shaking the bushes. 6-6.25ish level within sight...with both short and long term significance. Pressing against 5 and below? minny has cash doing weird stuff, but non-producer trade well equipped to extract supply. Maybe this defines this winter trade scenario...maybe this quarter...maybe the next 2 years....one of a million possibilities. Too many moving parts.
Depends on the gods.
Not using futures, I'm a seller of dec....maybe march basis...although not all that willing/excited, against 6-6.25ish, recognizing and respecting this technical/potentially game-changing level.
Using futures, and I'm NOT suggesting this to anyone...we're just discussing thots right?...I would revert to short/long term probabilities... leaning toward ownership of deferred futures on weakness depending how things play out. I know I'll get my head ripped off but I may even go texas.
Thot about options...about buying 625ish march calls yesterday while affordable thinking March may play against 625 on shortcovering to cash out basis contract. Didn't.
With Can$ showing weakness, quality maybe an issue, minny spread to Kansas/Chicago, improving/positive basis, 2 year short wheat talk....who knows whats going to happen....just I view these fundamentals putting a floor under deffered futures...somewhere.
Don't anyone take this post as gospel. I posted it to provoke the thought process and help out good old Charlie.

[mbdog]

furrow...my post wasn't in response to your question but 2 charlies. Wheat markets getting interesting to be sure. Maybe some nervous shortcovering after last 3 days?

[charliep]

mbdog

Here is a link to a longer term KCBT chart that cottonpickin has provided. No MGEX that I can find.

[URL="http://chartsrus.com/charts.php?image=http://www.sharelynx.com/chartstemp/free/chartind1CRUvoi.php?ticker=FUTKW"]long term KCBT[/URL]

Your comments are that wheat futures are cheap relative to recent history (10 years). The next comment is to separate what you might do in the short term versus your longer term market opinion.

[charliep]

The other comment about the long term chart is the steady growth in open interest and the large variation in daily trade volumes.

[mbdog]

that KC chart looks very similar to Minny that far out....which kinda/sorta indicates we're sitting near major multi-decade support....if it means anything. Does to me if I'm buyin. Old vs new worlds though. I'm expecting volatile wheat trade.

[mbdog]

furrow...overnite flat. You looking at pit price? Do they even still pit trade?

[farmaholic]

Charlie, re: the comment of open interest and daily volumes. I am learning, that isn't indicative of physical is it? Funds and Specs contribute?

Elementary :-(