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Wheat bull revival

Agriculture.com Staff 05/08/2006 @ 10:01am

Volatility is no stranger to this wheat market, and it looks like we're in for more of it for at least another 2-3 weeks. After spending much of last week struggling to get back above the downside gap, Friday's trade gave us a big gap to the upside, leaving the entire week's price action behind it.

The bulls got a double shot with the bullish crop tour estimate for Kansas of only 319 million bushels, compared to last year's actual 380 million. The next morning, Informa released their estimate for hard red winter wheat production at only 690 million bushels, down sharply from last year's actual of 929 million. Both of these figures are bullish by themselves, and the combination of them put the market back into a very positive mentality, despite the early harvest gearing up in the southern plains.

It is very difficult to assess just what hard red winter wheat production will be at this point in time. While rains could still help the Kansas crop and further north, we know we're going to have a short crop this year, and price rationing is still taking place. USDA will give us their first estimate of winter wheat production on Friday in their monthly production report, a very important report for the wheat complex.

The price action has the look of wanting to go higher and if it does so, this will likely be the last leg up for this move. It is an aging bull market with harvest just around the corner. Seasonally, wheat has a tendency to peak in early May and with the crop report due on the 12th (this Friday), a bullish number may be all it takes to spike us higher and give us that top.

In other words, I expect that we'll be topping this market soon, either with a crop report or just a surge higher on existing fundamentals. I would expect the contract highs to go out with likely much more upside than just that. The target becomes the 4.90-5.00 range if we can get past the contract highs.

Look for support on KC July at Friday's gap from 4.46-4.41. Look for resistance at Friday's high of 4.59, then the trough at 4.62 and then the contract high of 4.715. In the Chicago July, look for support at Friday's gap from 3.67-3.665. Look for resistance at Friday's high of 3.78, with the next resistance being the swing high and breakout at 3.82.

This publication is strictly the opinion of its writer and is intended solely for informative purposes. It is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. Futures and options trading always involve risk of loss.

Volatility is no stranger to this wheat market, and it looks like we're in for more of it for at least another 2-3 weeks. After spending much of last week struggling to get back above the downside gap, Friday's trade gave us a big gap to the upside, leaving the entire week's price action behind it.

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