Market Analysis: Wheat price held support

Posted July 19, 2013

This has been an uneventful price action week in the wheat market. As the September Kansas City wheat chart shows, the price is stuck in a sideways pattern. Wheat information leans to the bullish side but not enough to establish an up trend on the charts.

Demand has been the key for the last three weeks. Export demand this week declined but this is in comparison to two extra ordinary weeks. This week’s export sales report listed almost one million tons of wheat business for last week out of the United States. China topped the list. Brazil and South Korea bought sizable amounts.

It is a bullish feature to see Brazil on the list for the second week in a row. They bought over 100,000 metric tons each week. Argentina is their wheat supplier of choice but this country has restricted wheat exports because of limited production. Brazil buys high quality wheat; therefore, the United States and Canada have and should continue to record Brazil’s wheat business.

In addition to wheat sales sourced out of the United States. Selling by foreign wheat exporters was active. Notably, Egypt purchased 300,000 metric tons this week. Russia, Romania and the Ukraine supply the wheat purchase. Early in the week, an Egyptian official quoted saying his country has sufficient amount of inventory of wheat.

Producers selling at this time should consider re-ownership. Traders who use futures should look at the December Kansas City wheat contract. Those who incorporate options in your marketing program should start with December Kansas City and add using the March Kansas City wheat calls.

Bull call spreads and bull-spreading futures are choices for those who understand their use. No matter which strategy you use, understand your risk.

Tom Leffler
Leffler Commodities, LLC
2901 Lakeshore Drive
Augusta, KS 67010
866-468-6866

Larry Glenn
Frontier Ag
Quinter, KS
785-754-3348

PLEASE NOTE THAT THERE IS AN INHERENT RISK OF LOSS ASSOCIATED WITH TRADING FUTURES AND OPTIONS CONTRACTS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTIONS CONTRACTS. FUTURE’S TRADING IS NOT SUITABLE FOR ALL INVESTORS. OPTIONS CAN AND DO EXPIRE WORTHLESS. IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIMUM AND OF ALL TRANSACTION COSTS.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST SEVERAL YEARS. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAYAFFECT THE RESULTS.