Have we seen the top of the winter wheat market this year? these markets have been extremly volitile latley and that seems to be bringing out the bears. What is everyones opinion? Are we now on our way back down or is this just a temporary set back in a strong bull market?
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Most analysts (including me) track record on forecasting wheat is not good.
I always keep in mind the old trade expression "Buy the rumor and sell the fact". My suspicion is the wheat market will struggle to rally while the US is in the middle of winter wheat harvest/farmers are selling in the US for cash flow/collecting LDP payments. The next pieces of news will be progress on Northern hemisphere spring seeded crops. Finally it will be winter and the combination of usage pace/purchases (buyers will increase forward coverage if they see problems sourcing) and condition of southern hemishere wheat crops/ northern hemisphere winter wheat.
Only other comment is that growth in wheat demand is slow (population growth) and much of the export market has shifted to the non traditional exporters. Takes a lot more to get the wheat market excited price wise. Soybeans are just the opposite. Way too many supplies right now but will react to any weather threat due to a very strong/growing consumption base. Soybean caveat - market signals will hit South America in a time when they are seeding (October to December).
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I'm getting very nervous about this market. The last 3 weeks, they lowered the crop condition and the market fell each time. Today when they dropped HRW production below traders' estimates, it fell again. When the market trades lower on bullish news, you have to wonder why.
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Zaphod, Charlie's old adage 'buy the rumor, sell the fact' is really what the wheat market (and many other markets) seems to be about. I heard someone put it another way: "The futures markets anticipate what could happen (not what is happening) and often overshoot to the high or low side" during that process. Based on analysis done by a high-profile U.S. consulting firm, U.S. wheat futures were priced at a level that anticipated a much larger crop loss than all but the most pessimistic expect. Why? 'Cause trend-following funds and index-funds pushed prices that high for their own reasons.
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Can't comment on Russia but reasonably severe winter kill in the Ukraine when I was there. Didn't see so much in driving but many of the crop specialists talked in the 20 to 30 % area. Obviously there will be some spring seeded crops go back on this land.
I wouldn't look at a big impact from eastern Europe until this fall. From my experience, the markets attention is focused on the western European and North American crops. Winter wheat harvest is mostly old news (still severe winter kill as WRAPper has highlighted) but is news that is known for the most part.
Starting to see the nervousness around Northern hemisphere spring seeded crops. When Eastern Europe will come to play is this fall when buyers go to traditional exporters and find limited supplies/high prices. The next stop will be eastern Europe and if they are not able to fill/also push prices higher, then there is the making of an interesting situation.
Prices in a market like this is like watching the tide. They will move in a range between high and low. What a person will look for is whether the range moves to a higher plain (maybe) or whether it breaks lower (could also happen with a larger spring wheat crop).
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