Commentary
The wheat markets went into the January 12th WASDE report on a downer, having retreated over a dollar in the last 15 days. USDA added more fuel to the bear fire in my view with increases in carryover and reduced exports sending prices into new lows on Friday Jan 14th. December 1 stocks were 1,390 billion bushels, down 18.5% from last year. Implied disappearance of 384 million in the second quarter equated to a usage reduction year to year of 16%. If there was a surprise on report day in my view it was that HRW (KC Wheat) acres were lower than anticipated and SRW (Chicago) much higher. Although world prices are trumpeted as higher from those with wheat to sell, clearly, the U.S. needs China business to come anywhere close to USDA estimates in my opinion. At the rate the US is shipping wheat, the USDA could be 50 million bushels too high in its estimates and thus the carryout is headed to 675 (mbu), from 628 currently. Wheat export news will be one key to futures direction, and any improvements could help stabilize prices. I look for the winter wheat outlook to come into focus in early February, when various states will update their ratings of wheat crop conditions. Dryness continues to grip the U.S. Plains, leading to potential concern for high acreage abandonment. Northern Plains conditions potentially affecting spring wheat plantings may also be a price factor. I included a May Kc wheat vs May Chicago. We closed last week at 3.6 cents KC over Chicago. Looks to me like Chicago wheat can continue on KC amid an unwind of long KC/Chicago wheat spreads and to a lesser extent selling wheat vs corn. New crop contracts on these spreads is where to enter for a bigger protracted bounce in my opinion, but if you are looking for a short term bounce from a near term oversold condition, see if the gap holds at 1 cent KC Wheat over which is essentially the 50 percent retracement of the last summers low, to this Falls high.
Trade Ideas
Futures-N/A
Options-N/A
Risk/Reward
Futures-N/A
Options-N/A
Please join me for a free grain and livestock webinar every Thursday at 3 pm. We discuss supply, demand, weather, and the charts. Sign Up Now
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
53 W Jackson Suite 750
Chicago, Il 60604