Finally! Someone bought some US Wheat. While we have seen Egypt tip their toe in the water and make two small purchases over the last 45 days, it was a purchase by unknown destinations that buoyed the market overnight into this morning. Exporters this AM also sold 224,000 MTs of HRW to an unknown destination. Concern over availability of high quality wheat in Russia continues. Spot Russian fob values are up sharply this week. Interior Russian wheat continues to forge new 2-year highs. Russian flour prices are also higher this week. Also of note was that sales for future shipment last week came in at a better than expected 711 K metric tons besting expectations of 300-600 K.
The purchase this morning from unknown could be Egypt, Algeria, or a sizable buyer of N. African origin. Regardless it could give thoughts to the US becoming more competitive on the world export market. With the US winter wheat crop entering into dormancy, is this the shot in the arm the market needs to move higher from a demand standpoint? World stocks are tight and traders will perhaps get a glance next Tuesday as the supply/demand from the USDA is released at 11 am. Note: funds came into this week short approximately 38 K of Chicago wheat and approximately 10 K of KC. Much of the 20 cent rally in both contracts was short covering in my view amid the friendly demand news. Should we garner more world demand on subsequent flash sales and export sales, I would not be short this market.
Futures and options trades worth considering: Buy KC futures on a close over 517.4. Stop loss under 5.08. Target 535.4 and then 5.65. I would probably look at options into the next two USDA reports to establish long positions into the market. Aggressively, buy the 540 KC wheat call for 12 cents. Sell the 490 put for 11 cents. Spread cost a penny plus commissions and fees. Conservative, buy the 540-600 call spread for 7.4 cents plus commissions and fees. I’ve been favoring using KC wheat as its 19.2 cents less (March 19) on the Board than the Chicago contract and I eventually think it will gain on Chicago wheat in the long run. My opinion here on that inter market spread. Call me for other spread relationships and potential opportunities. 888 391 7894 or email [email protected]
Each Thursday I hold a free grain and weekly webinar at 3 pm Central. Discussed topics include supply, demand, weather, charts, and trading/hedging opportunities. Link below.