Wheat blow off top? Or the start of something really big!
Ray Grabanski Market analyst
4/13/2006, 2:55 PM CDT
Wheat had a very sharp rally this week, up over 50c from April 5-12 in the hard wheats and running to new highs. This was a huge surprise as crop conditions actually improved Monday by 3%, with Pro Ag yield estimates up 0.3 bu for winter wheat. Yet the market seems concerned with a return to a warm/dry weather pattern in HRW wheat including KS, OK, and TX.
So is this a blow off top, or with new highs is wheat going to run a lot higher in the coming few weeks?
Fundamentals and technicals are now working opposite directions, with the technicals turning higher on the new highs as momentum has clearly turned back in the bulls' favor. Money is flowing into the commodities, and wheat is now the golden child after the most recent week. Hot/dry weather is the talk of the CBOT in HRW country, but flooding in HRS wheat country is also getting plenty of media attention. Raging gold/silver (pushing through 25 year highs almost daily) helps to increase the flow of money into commodities, so why not buy some grains, too (they're plenty cheap). Perception is reality in futures markets, and the perception is that the US wheat crop is going to h/ell in a handbasket -- burning up in the south and flooding out in the north. And there is nothing better to own than commodities!
