Wheat Takes Center Stage!
Earlier this year, all grain traders wanted to talk about was the Corn market, as surging demand for Ethanol and livestock feed led some to question whether we could produce enough to meet demand. Fast-forward to August and that talk has cooled right along with Corn prices, as the Wheat market has quietly moved to the forefront in the minds of grain traders. Just this morning, Chicago December Wheat moved to a new contract high of $6.89 ½ per bushel, with Japan looking to tender for 131,000 tons and Egypt in the market for 55,000 tons as well. This follows a Morocco tender for 630,000 metric tons of optional origin Wheat. It appears that Mother Nature was not kind to Wheat growers this season, with excessive rains hurting the crops in the U.S. and France, while hot, dry conditions have played havoc with Canadian, Australian, and Ukrainian production. This is causing Wheat importers to try to lock in supplies – despite high prices – in fear that high quality Wheat will not be available in the coming months. Traders will keep a close eye on this Friday’s USDA crop production and supply/demand report, especially world ending stock figures.
Looking at the daily chart for December Wheat, we notice the resilience of the rally, as prices remain well above the 20-day moving average. In addition, the most recent Commitment of Traders report shows a battle between large and small speculators, with large specs holding a net-long position of 27,977 contracts and small specs net-short 27,781 contracts as of July 31st. With prices at contract highs, it will be interesting to see if the small specs can continue to hold their short positions in the face of commodity fund buying. The 14-day RSI has reached oversold territory with a reading of 75.21. $7.00 looks to be key resistance for December Wheat, with support found at the recent lows of $6.39. At the end of the day session, December Wheat was trading at $6.88 ½, up 5 cents.
