Market eyes rain for wheat crop
The market fundamentals finally include beneficial precip for most of the winter wheat states, from this past weekend.
Dry early this week and then more rains by late in the week is the expected weather. The 30 day outlook forecasted by our World Weather meteorologist, Drew Lerner suggest above normal precip. The Climate Prediction Center forecast the drought to persist through June. The trade is aware of acres already lost to drought and fire. They are also aware of how high prices have cost the USA wheat sales and competitors interest is raising more wheat in 2006 due to those same high prices
Wheat Moving Average level for July wheat futures are as follows: CBOT's SRWW ='s 3710-3820 & 3870, tonights close 3700, KCBT's HRWW ='s 4230-4370 & 4400, tonights close 4224, and MGEX Spring Wheat ='s 4270-4280 & 4290, tonights close 4134. Our Allendale Advanced Charts does show and explain the importance for CBOT's SRWW July futures to hold 3620, this weeks low. Export Sales: We need to average at least 11.18 mil bu per wk for the balance of the 2005/06 mkting yr in order to meet USDA's newest export target of 1 bil bushels. Actual sales of 12.4 were on the low end of pre release weekly export sales trade estimates of 300-550 K tonnes (11.0-20.2 million bushels). The shipment pace continues to lose ground and yet based on the pace of shipments thus far in the marketing year, project to 32 mil bu more than USDA projection of 1 billion bu. Wheat acreage: Allendale estimates 57.966 million acres. This is the second lowest planted acreage in 30 years. Last year's 57.229 million acres was the lowest in that time frame. Using Allendale Inc. 43.23 bushel/acre trend yield, it would imply wheat production of 2.122 billion bushels versus last yr's 2.105 billion bushel production.
Quarterly Wheat Stocks: USDA will release its next quarterly grain stocks report on March 31st along with its Prospective Plantings report. If wheat is expected to continue its average historical use, look for stocks on and off farm to register 977 mil bu. This would compare to yr earlier levels of 984 mb and 1,021 mb the year before. The three yr ave has been 970 mb. Trade Position: after having met our long MGEX July wheat obj, new trader recommendations have been posted on our Grain Trading Strategies page. Our short KCBT wheat position achieved our objective Thursday. Our CBOT short obj was met on Wednesday. New recco's have been written for CBOT SRWW and KCBT July futures and found on the same Trading page. Wheat-Corn Spread: Moore Research Center has a July KCBT/July corn spread which may be entered on approximately 4/10 and exited near 6/25. Past 15 yr history has shown 13 winning yrs and 2 losing. Over the past 15 yrs, Moore Research identifies the worst equity draw down of $787 (1999), the best equity amount of $4,850 on 4/25/96 and the best profit amount of $2,437.50 in 1996. The ave profit on winning trades of $750 and ave loss $606.25. One word of caution is the spread has never been as high as it is at present over the past 15 years for the month of March. In 2005 and in 1996 the spread was entered at 1.06 prem the wheat which have been the highest highs. In 2005 the profit was $125 and in 1996 $2,437.50. The spread does appear to have good odds but with the current value of $1.90, the air up here may be mighty thin. 50-50 Week: Our Historical Price Trends page has a litany of the major grains with 50% odds for futures to close above and 50% odds for futures to close lower with nearly identical risk to reward. If there was a week to suggest trade the range, next week may be it.