Commentary
Wheat Markets continue to trade sharply higher with dips being seen as buying opportunities is the theme for the week so far in my view. Weather maps are showing dry conditions for both the EU and US Southern Plains and the wet maps for the US Northern Plains that potentially brings more delay to Spring wheat plantings. The weather concerns amid more talk of the Indian wheat crop production estimate being downgraded has in my view pushed the July Minneapolis futures (MWN22) to making new contract highs along with September 22 Paris wheat. July KC wheat closed above $12.00 today. Despite a small improvement in crop ratings this week from 29 percent good to excellent from 27 percent the week prior, the crop’s production prospects remain weak in my opinion, and persistent drought is likely leading to higher than usual acreage abandonment. Tomorrows 11am WASDE report, could see USDA playing with numbers and we could see surprises. How much they cut from Uranian exports is one number the trade will be looking at. The second will be the USDA supply/demand outlook for 2022/23. The average trade guess for new crop ending stocks is 659 million bushels, with a range from 550 on the low end to 859 on the high end. World numbers for ending stocks come in at 272 million metric tons, with a range of 261 on the low end and 278 on the high. The World numbers could be a big wild card given the situation in Eastern Europe. Post report we will have wheat crop tours starting up, and those findings could have a more of an impact on price in the weeks to come in my opinion. With that in mind, I am considering the following trade.
Trade Ideas
Futures-N/A
Options-Buy the August KC wheat 13.00 call and sell the September KC wheat 14.00 call for a 5-cent debit.
| KEU22C1400:Q22C1300[DG] |
| Risk/RewardFutures-N/AOptions-This diagonal option strategy has unlimited risk as the long August call expires one month prior to the short September call. Therefore, if one enters into as a spread, one should exit as a spread. We are looking for the Kc wheat market to test the March highs and maybe surpass them and challenge the all-time highs at 1380. Once can put a stop loss upon entry at a 5-cent credit. This risks ten cents upon entry plus all commissions and fees. Call or email me with questions. Chart attached below.Please join me for a free grain and livestock webinar at 3pm Central every Thursday. We discuss supply, demand, weather and the charts. Sign Up Now |
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