The wheat market is on fire! As we’ve been suggesting to clients, we are worried about the technical structure of the wheat market. The inability to break to old lows and then come back to the $4.51 level basis July wheat has been troubling. The breakout today confirms the bulls now have control of the market. The reason being given is overall concern that the anticipated big acres of wheat plantings in U.S. may not occur, along with continued concern that the southern Hemisphere production will be limited. If you are short the wheat market, we hope you took some action based upon our concerns. With today’s 22¢ move in wheat, it’s very obvious the funds are running loose again. You have to assume a modest correction tomorrow, but getting July wheat below $4.53 now will be very difficult.
The breakout in wheat also triggered some short profit taking and some concerned speculative buying of corn. While we are enjoying this price rebound, it’s coming a little too early and too strong for our liking. We have to suggest this rally is being fueled by the slow harvest pace of corn. We anticipate greater harvest pressure to start in the next 10 days. So if you are long, we strongly urge you to start looking at defending some your gains by either selling out-of-the-money calls against the long futures or buy a nearby December put.
Of all the commodities, soybeans is the one that surprises us the most. Early bean yields are coming in stronger than even we anticipated. We are hearing a lot of 60+ yields. On the other hand, soybeans are simply not maturing as fast as we would like, so this is keeping the market firm for now. If you have any off-the-combine cash sales to make, you should sell immediately for quick shipment. Our expectation is still very high that a hard sell off is still in store for beans as we move into October.
Give us a call at (800) 832-1488 if you are interested in developing a long-term marketing strategy. If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies for the 2006 marketing season, e-mail me at [email protected].
