Longterm fundamentals support wheat prices
For The Week: March corn futures closed up six and a three quarter cents (1%) per bushel vs last Friday's closing price, March soybeans up thirty four and three quarter cents (+2.6%) March CBOT wheat down sixty six cents (-7%), March KCBT wheat futures down fifty eight and a quarter cents (-5.3%) and March MGEX up three dollars and eighty two cents (+24.5%)
For The First Fifteen Days: thus far for the first fifteen days of the month of February, March corn up 3.2%, March soybeans +10.5%, March CBOT wheat up 10%, March KCBT wheat futures up 11.5% and March MGEX +52.7%.
Wheat Fundamentals: weekly export sales of US wheat are the second lowest of the marketing year. Allendale's research suggest a forward decining trend has been the historical norm with a notable drop by April. Japan announced it will raise its wheat price by 30% beginning April which may help confirm economic rationing. Japan has also announced it may be time to seek other suppliers than just the US, Australia and Canada and are willing to sacrifice high protein for a lower price. The US has purchased 25 K tonnes of high protein spring wheat from Germany. The price of German wheat is $3.73/bushel discounted to US spring wheat prices include $65 per tonne freight cost at the time of the purchase. All old crop soft white wheat bids have been pulled in Portland, OR. For the past 8 days Portland pulled its Feb bid but effective today, all old crop bids have been stripped. Two possible reason's, #1 current supply is enough to meet current demand and or the import of high protein spring wheat from Germany in the amount of 25,000 tonnes. Effective for Thursday evening MGEX electronic trade, trade limits have been increased from 90 cents per bu to a new level of $1.35.
End Users and Middlemen: The American Bakers Association is calling upon all bakers to band together in Washington, D.C. for an industry march to stress the urgency of the current wheat situation. This would be the first national food price protest on Washington since World War I. They will meet with the White House, USDA and key members of Congress. On March 12, ABA is arranging for the "Band of Bakers" to meet with newly confirmed Agriculture Secretary Ed Schafer and senior White House officials. They ask the USDA to limit exports of US wheat or open up Conservation Reserve program acres to ease price pressure for wheat. USDA says they are not considering imposing restrictions on US wheat exports and interest in opting out of CRP has been light.
February 22nd: option expiration is scheduled for Friday Feb 22. Consider if it could be the function of the short term investment fund to inflict the greatest amount of financial damage for the outsiders, funds could target the $16.95 and $17.25 futures price at the MGEX. These are the two strike prices where funds have the majority of the open interest, relative to the present futures price of $19.35. MGEX's present $1.35 per bushel daily trade limits are effective for Tuesday and Wednesday of next week.