Grain Spreads: Wheat Chop
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Commentary
Wheat prices rose today after dipping yesterday, supported by export demand, including a purchase from Tunisia and tender activity from Algeria and Jordan. However, rains are in the forecast through next week for many wheat growing areas both here and in the Black Sea in the 1 to 5 and 6-to-10-day forecasts. Last week’s WASDE raised ending stocks at 846 million. It’s a sizable carry in the market amid weak overall demand. For today, looking at the Board overall we saw fund managers in my opinion buy energies, grains, and meats aside from precious metals. A couple of agreements in principle with key trading partners would give thoughts to better commodity demand. But would it be enough to drive the 90K Chicago wheat and 40K KC wheat short to cover? I doubt it as things stand now unless something else enters into the market. That doesn’t mean though that we could see some further speculative buying or light fund short covering. Wheat charts are choppy in my view and all over the place. It is my belief we could see prices rally and remain bid until the middle of May. Historically that is in my opinion likely because the wheat sometimes follows the seasonal rallies in the spring grains in the same time frame. However, if we see price action bid up for the next month, the same equal and opposite reaction occurs as harvest pressure sends prices back lower. As always trade the charts. July wheat is the most actively traded contract. Levels through next Friday 4/25. Support is 553 to 551. A close under and it's a retest of 524, (5% lower on year.) A close under and its 512/514. Resistance is the 50-week moving average at 569 and trendline resistance at 5.70. Consecutive closes over have the market moving 5% higher on year at 587 and then 594 and 5.98.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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