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Wheat continues its roll

Agriculture.com Staff 08/31/2007 @ 1:17pm

Wheat made another new round of contract and historical high prices this week.

The export market remains very active as end users continue to cover needs. The obvious signal is that the world is tight on inventory, and that importing countries want inventory secured, nearly regardless of price. On the other hand, the reality is probably that these countries will front load their exports, and that U.S. sales to foreign countries will slow in the months ahead.

Yet, one should be prepared for the wheat market to potentially peak and then end violently. Historically, when markets make new highs, they do so in grand fashion, but often lose ground faster than they went up. Therefore, if you are producing wheat in the year ahead, as long as the trend is trying to work in your favor, allow it to run. But, with Chicago July contract trading over $6 this week, one should also be making some sales or hedges to get at least a portion of your production protected, if not a strategy to protect 100% of your expected production. Often in major bull markets, by the time you get enough "information" or desired technical signal to believe that a top is in place, the market has already lost major value.

Therefore, consider implementing strategies on theory that selling on the way up is generally a good practice, despite possibly losing some opportunity. Ultimately, if and when prices peak, and the market tumbles, having early sales in place suddenly looks attractive. This will be especially clear to those who feel the weight of the market crash around them and they have no sales in place.

If you have any questions or comments, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM, ext. 129.

Wheat made another new round of contract and historical high prices this week.

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