Ask the Analyst

Market Information from Archer Financial Services and MGEX

Each Wednesday, Brian Henry, Market Analyst for Archer Financial Services (Brian’s Bio), will post a new market article. Readers are encouraged to email Brian with questions and can expect a response within 24 hours.

Have We Reached Support Levels?

Spring Wheat continues to bounce around in quiet low volume trade.  Order flow is the name of the game right now.  This market lacks a story.  Export activity remains light and the crop is getting planted on time. 

Mpls July tested support levels established in December.  These levels have held for now and should continue to hold unless new crop selling or fund liquidation in Chicago and KC provide additional pressure.  Do not be short old crop Spring Wheat.  I expect the July contract to continue to chop around near these levels for the time being.  Tight old crop supplies does increase the potential of a demand based rally the July and probably the Sept contract.  A rally of this nature is not likely, if the market continues to feel confident in new crop supplies.

Prospects for Spring Wheat production remain positive, but the crop has a long way to go.  I expect Spring Wheat to remain a follower of the other wheat markets.  The focus will be on the maturation of the SRW and HRW wheat crops.  These crops remain in relatively good condition.  SRW production remains on pace to exceed 500 million bushels.  HRW production may exceed 1 billion bushels.  Findings by the crop scouts on the Kansas Wheat tour do not dispute this idea.  There are some problem areas.  Crops in many areas of Texas, western Okla, southwestern KS and eastern Colorado have suffered from dry conditions.  Most of the remaining areas look good at this point.  Weather will remain a factor until harvest is completed.

Spring Wheat plantings remain on pace.  Most areas are finding enough moisture to get the crop germinated.  Cool temperatures have helped the dry conditions, but hindered development as emergence is slow.  A small shift in Spring Wheat acres to row crops has occurred over the last few weeks.  I doubt the acreage shift is substantial.  The acres that may have been shifted are probably in the better Spring Wheat producing areas in terms of average yield not necessarily quality.

From a producer standpoint, I would be leery of selling futures near these levels.  The best opportunities to hedge by selling futures are probably behind us, but the market does have the potential to rally.  Users should continue to cover needs into the future.  If you have your needs covered, you can always work the futures market from the short side to hedge against high prices paid for flour.

Do you have a question about this article? For a personal response within 24 hours, please email brian.henry@archerfinancials.com.

This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of AFS is strictly prohibited.

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Ask the Analyst Archive

Marketing Spring Wheat Effectively - September 19, 2007

Do You Dare Buy Minneapolis Sell Chicago - September 26, 2007

Will Spring Wheat Acres Increase Next Year - October 3, 2007

Will the Dec Roll Impact New Crop Wheat - October 10, 2007

Is It Safe to Get Short Wheat - October 17, 2007

Sifting Through the Noise - October 25, 2007

What's Next for Bullish News - October 31, 2007

Should We Expect Foreign Countries to be Aggressive Wheat Exporters - November 7, 2007

Where Do We Go From Here - November 14, 2007

Can We Count On Argentina To Export - November 23, 2007

Reserve Wheat Stocks - November 28, 2007

Strength in Spring Wheat - December 5, 2007

How High is Too High - December 12, 2007

Stocks are Dwindling - December 19, 2007

Index Fund Rebalancing - January 2, 2008

Wheat Acres 2008 - January 9, 2008

How Has The Game Changed - January 16, 2008

Will We Run Out of Spring Wheat - January 23, 2008

How High Can Spring Wheat Go - January 30, 2008

What's Left To Say About Spring Wheat - February 6, 2008

Can We Call It a Top - February 13. 2008

Will the May Contract Have the Same Price Action the March Contract Experienced? - February 20, 2008

Is This Really Happening - February 27, 2008

How Quickly Things Can Change - March 5, 2008

The Beat Goes On - March 12, 2008

Outside Forces - March 19, 2008

Perspective Plantings - March 26, 2008

Spring Wheat Acres - April 2, 2008

Spring Wheat Carryout - April 9, 2008

Is Wheat Going To Be Able To Continue This Rally - April 16, 2008

Where is the Support? - April 23, 2008

The Down Trend Continues For Now - April 30, 2008

Have We Reached Support Levels - May 7, 2008