Chicago wheat has broken out vs Corn, KC wheat, and Minneapolis wheat contracts. Trend and Index following funds have flipped from a net short position of 13 K short to 2500 long in Chicago. We have seen heavy buying the last two days by funds to take them from a small net short to a net long. DEC 19 Chicago has broken out on the charts, (see below) while it widens against the KC contract and tightens versus Minneapolis. WZ19 vs KCZ19 traded 4900 times and widened out to 94 cents Chicago over. Its sizable and it doesn’t look like funds are going to flip it the other way just yet. It also has rallied vs Corn from 1.00 over December 19 corn to 1.30 over on today’s close. Wheat markets are pushing higher amid rising world prices that were seen just yesterday in Egypt’s tender. Egypt bought 405,000 metric tonnes of wheat yesterday with 285 K from Russia, 60 K from Ukraine, and 60 K from France. The average price per ton was 230.55 CNF which is almost 9.00 a ton higher than last weeks purchase at 221 per ton. This confirmed suspicions of higher Black Sea offers. Also with confirms of a phase one deal with China more likely for US AG purchases, funds are covering wheat positions across the Board in my view. I look for wheat to continue to push vs corn in the near term possibly to 1.53 over corn soon.( chart below). The spread needs to hold 1.23 on any pullback. (see chart)
Outright Chicago December wheat could make a run for 545 to 550 according to the chart below. Buy any pullbacks at 522. If we hold here on a close over, look for those levels in the 550 area to be challenged. If basis levels hold globally, look for a rally of 20 to 25 cents in the very near term in my opinion.
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