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07-29-2010 06:52 AM - edited 07-29-2010 02:15 PM
After the close:
Wheat Options Talk: One trader says, "We've certainly snapped to attention, relative to the lazy way we got here, but this stuff could easily get much more lathered up. Open interest is going up, not down. People are either jumping on for the ride or fading this massive move. Either way we're seeing the big volumes sustain themselves fairly easily. Things truly could be just revving up here in the wheat options. Look for two-sided trade to possibly creep into the picture now that we got the volatility uptick that so many were waiting for."
At the close:
The Dec corn futures settled 3 cents higher at $3.93 3/4. The Nov. soybean contract finished 10 cents higher at $9.88. The Sep. wheat futures closed 12 cents higher at $6.27 1/2. The Dec. soymeal futures contract settled $2.70 per short ton higher at $286.90, and Dec. soyoil closed up 43 points at $40.00.
In the outside markets, the NYMEX crude oil is $1.37 per barrel higher, the dollar is lower, and the Dow Jones Industrials are down 20 points.
The Dec corn futures are 6 cents higher at $3.96 3/4. The Nov. soybean contract is 8 1/4 cents higher at $9.86 1/4. The Sep. wheat futures are 13 1/4 cents higher at $6.28. The Dec. soymeal futures contract is $2.80 per short ton higher at $287.00, and Dec. soyoil is up 19 points at $39.76.
In the outside markets, the NYMEX crude oil is $1.10 per barrel higher, the dollar is lower, and the Dow Jones Industrials are down 57 points.
One analyst is calling it a 'perfect storm' for wheat, and corn and soybean markets are following the run-up. Crop-weather problems in Russia is the main catalyst for this huge rally in wheat. "However, the funds are very short wheat, and are trying to get out of those positons. So, they are buying their way out of the short positions. Funds are trying to buy back 15,000 contracts/week to just get even the market. Five weeks ago, the trend-following funds held a record 77,000 short wheat contracts. Since then, they have been buying back 10-15,000 of those contracts per week. Coming into this week, they still had 22,000 short contracts. Are there enough sellers is the question? With little bearish news, who wants to sell now? The funds aren’t really trying to get long the market, they are just getting out of their ‘short’ positions. If there are people that are willing to sell, the funds will be right there to buy. If that buying comes in, the wheat market could go to $6.40. On Thursday, the market already hit $6.32." he says.
Today, everything is coming up roses. Outside markets are supportive, more, bad Russian weather, and for that matter all European Union wheat producing nations.
Now tomorrow, this same analyst believes there will be some profit-taking, headed into the weekend. Why? Because, even though the trend-following funds are short this market, someone has been long and will want to take some profits. You also could see some 'month-end' profit-taking tomorrow. So, tomorrow's market could be down, he says.
At the open:
At the open, the Dec corn futures are 6 1/2 cents higher at $3.97. The Nov. soybean contract is 9 1/2 cents higher at $9.87 1/2. The Sep. wheat futures are 13 cents higher at $6.28 1/2.
In the outside markets, the NYMEX crude oil is $1.16 per barrel higher, the dollar is lower, and the Dow Jones Industrials are up 29 points.
Buying is heavy, on the open, traders say. Jim Bower, Bower Trading Inc., sums up nicely, in a letter to customers, the reason the market is rallying. "Yesterday, extreme heat occurred without any precipitation and further exacerbated a drought that is punishing Russia in ways not seen for a very long time. Production cuts have likely occurred and will continue to occur across almost all realms of agriculture including irrigated and non-irrigated crops varying from sugar beets and potatoes to soybeans, wheat and corn.”
More friendly market news: USDA announced Thursday sales of 146,000 metric tons of corn for delivery to Mexico. Of the total, 116,000 tons is for delivery during the 2010/2011 marketing year and 30,000 tons is for delivery during the 2009/2010 marketing year; and
-- Export sales of 20,000 metric tons of soybean oil for delivery to China during the 2009/2010 marketing year.
The marketing year for corn began Sept. 1 and soybean oil began Oct. 1.
USDA released friendly weekly export sales this morning. For corn, USDA says 960,400 metric tons were sold last week, within the trade estimate of between 800,000 – 1,000,000 metric tons. For soybeans, USDA says 1.479 million metric tons, above the trade expectations of 900-1.0 million metric tons. For wheat, USDA says 919,000 metric tons, much higher than the trade expectations of 300,000-400,000 metric tons.
Early calls: Corn up 2-4 cents, soybeans up 4-6 cents, and wheat up 8-10 cents. Russia's wheat crop gets smaller by the day. The market continues to build in this drought and the other EU countries' growing problems. Export Sales at 7:30am. Outside markets are all lined up for another nice run up, or in baseball talk, 'ducks on the pond'.
Overnight grain=Trading higher.
Crude oil=Trading $0.41 per barrel higher.
Wall Street= Seen opening higher as the Euro zone's economic sentiment has hit a 28-month high. Also, today's U.S. Jobless Claims report is expected to show fewer people are filing for jobless benefits.
More in a minute,
07-29-2010 09:03 AM
I don't care what the traders say, the world will not run out of wheat and supplies will be more than adequate to compensate for the losses overseas and absorb extra demand. Having said that the market doesn't look like it wants to slow down anytime soon and I wouldn't stand in front of it but just buy some puts underneath.
The market right now is telling everyone, here and abroad, that we need more what production. There will be a response, especially if prices move higher. I feel we are just setting ourselves up to have record ending stocks of wheat, both U.S. and world, next year.
On the other hand, corn and soybean acres will suffer next year, maybe soybeans not as much due to double cropping after wheat harvest.
These crazy volatile markets can really throw a wrench in maintaining adequate supplies of different grains and send shockwaves through other markets. But that is what you get when 60 to 70% of all the long positions are controlled by pure speculators, who care nothing or about the fundamentals or have no use for the underlying product.
07-29-2010 10:38 AM
I believe you are generally right about there being plenty of wheat. But the issue is - who has it, what is the quality, and can it be exported? It is the global trade in wheat that can really matter. Some, like India, can have a temporary surplus and desire to export but, it's almost impossible for them to do it. First, the class and quality isn't desirable and the subsidy to bring it down to global prices is huge, not even counting the difficult process of moving it to an exportable position domestically.
Even though wheat is the most traded grain commodity, it's the 5 or so big exporters who are set up to move physical in the classes desired. Russia and Ukraine are a big provider of low quality wheat for price conscious importers, some of whom have very large populations and are politically unstable. Since they now are being forced to move to other providers thay are now going to increasingly compete in the markets for higher quality supplies. That might be Europe, but they have just recently realized that cheap feed wheat they were going to import might not be available.
I don't believe corn and bean will go to wheat in any area that can grow just decent corn. By next spring wheat acres will be fairly well known. However, corn and beans are likely to jump in value if it seeps into the market that ethanol, China and global feed needs are going to tap into these crops in a larger way. Corn looks to sitting good for harvest due to timing and conditions this year. But I would watch it closely.
07-29-2010 10:48 AM
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