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Excitement in the wheat market

Agriculture.com Staff 02/03/2006 @ 2:19pm

I did two marketing meetings in Kansas last month. When I go to Kansas, I always take along my seasonal wheat charts. The last time I raised wheat was 1969, so my expertise is limited to observations from studying historical price patterns. Two seasonal rallies show on the long term charts at this time of year.

One is a very brief rally for a few cents in the first and second week of January. I consider this one to be of too short duration to be very useful for farmer marketers.

The second uptrend on the charts comes between January and early May. At first glance the chart looks pretty impressive. When breaking the move down by individual years, however, the trend is much less reliable. A factor that does not show up when looking solely at the chart is that in 1996 futures went from $4.40 to $6.60 during that time. If you take out that unusual year, wheat futures are almost flat during that period.

Notwithstanding the effect that big move had on the long term trend, wheat futures in January put on a very impressive performance. The conclusion I draw from studying the charts over many years is that the spring rally is not very useful for being long either cash grain or futures. However, it may be useful to sell new crop wheat for the coming harvest.

There is a reliable trend for futures to drop from the first week of May into the harvest low in July. Forward pricing new crop grain for harvest delivery makes a lot of sense whenever the price reaches the upper portion of the range in recent years.

I have too little experience with wheat marketing to have any idea of how long the current strength will last. On the other hand, few market analysts were predicting rallies in the grain markets with carryovers as large as they are. Psychological factors that are difficult to explain are moving prices when fundamental factors would seem to indicate that prices should not move much. This is a time when careful planning and self discipline must be used.

I did two marketing meetings in Kansas last month. When I go to Kansas, I always take along my seasonal wheat charts. The last time I raised wheat was 1969, so my expertise is limited to observations from studying historical price patterns. Two seasonal rallies show on the long term charts at this time of year.

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