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Wheat futures end lower for the week

Wheat: Futures ended 7 cents lower for the week but steady for the day on spread liquidation of beans vs. wheat. The attaché from Australia reported that wheat planting could near last years record of 13.55 million ha. The attaché in Argentina is suggesting wheat output is 9.0 million tonnes vs. the recent USDA estimate of 8.5 million tonnes. The drought continues to impact wheat production in Argentina. Top soil moisture maps covering South America are showing a need of moisture as wheat is in the head filling stage currently in Argentina. Weather in the spring wheat area of the US would ask for the rains to stay away for awhile. Forecasters are calling for rain this weekend in ND and MN which will slow harvest. However we are getting reports of yield in the mid 90s in MN. Spreads between Minneapolis wheat and Chicago should narrow as harvest yields are large in spring and harvest is complete in winter wheat. Call for more ideas.

 

 

 

 

Trade Idea(s):
Chicago Wheat: (08/13) Sell Dec 514, risk 528, objective 475.
KCBT Wheat: (08/12) Stand aside.
MN Wheat: (08/12) Stand aside.
(08/12) Bought Sept Chicago/sold Sept MN wheat at -80 cents on a stop, risk to -98, objective -40. Closed -67.50.
Option Strategy(s):
(07/06) Sold Dec Chi 630 call 20 1/4, move risk to 20, objective 0. Closed 7 3/8.
(08/05) Sold Dec Chi 650 call/sell 520 put at 42, risk to 63, objective 0. Closed 46 7/8.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Wheat Technical Commentary: Spring wheat posted a new contract low for the fourth consecutive session today. New resistance can be found up at 5.71 1/4. Selling any rebounds in this market should be the way to go.

Vital Technical Indicator: the next schedule projected major turn day in store for wheat is August 20.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Closing Hogs Commentary

Hogs: In both the hog and cattle industries there are pretty clear cycles of profit and losses. Due to the biology of the animals (the length of time it takes to respond to market signals) the cycles are different in length. For hogs you are looking at a four year cycle with generally two year of rising prices and two years of falling prices. You may have herd about the low end of pricing hitting 1994, 1998, and 2002. The current loss portion of the hog cycle is now on about 23 months of almost consecutive losses. By November the loss in equity in this loss cycle will equal the 1998/1999 liquidation. Given current futures prices of lean hogs, corn, and soymeal (and correct basis applied) our models indicate producers will post losses through May of 2010. This would extend the loss cycle to 30 months long. The loss in equity in the industry will be around 20% larger than the 1988/1999 period. For short term pricing, this market has not bottomed. Fundamental information is still bearish and we do not have the technical signals of a turnaround yet. We would guess it could take as long as October before we can call a bottom in this market yet. Keep in mind our projection is for December to expire at $47.

Trade Idea(s):
(08/06) Stand aside.
Option Strategy(s):
(07/28) Bought Aug 60 call for $.40, risk 0. Closed $.02.
(08/10) Sell Dec 50 call for 4.40, risk to 5.35, objective 0.

***Disclaimer*** the commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Lean Hog Technical Commentary: Hogs were unable to find much follow-through strength today. Instead the market posted a small inside bar on the chart. Overall the picture still looks pretty bearish here.

Vital Technical Indicator: Next projected major turn day for lean hogs is August 26.

Wheat: Futures ended 7 cents lower for the week but steady for the day on spread liquidation of beans vs. wheat. The attaché from Australia reported that wheat planting could near last years record of 13.55 million ha. The attaché in Argentina is suggesting wheat output is 9.0 million tonnes vs. the recent USDA estimate of 8.5 million tonnes. The drought continues to impact wheat production in Argentina. Top soil moisture maps covering South America are showing a need of moisture as wheat is in the head filling stage currently in Argentina. Weather in the spring wheat area of the US would ask for the rains to stay away for awhile. Forecasters are calling for rain this weekend in ND and MN which will slow harvest. However we are getting reports of yield in the mid 90s in MN. Spreads between Minneapolis wheat and Chicago should narrow as harvest yields are large in spring and harvest is complete in winter wheat. Call for more ideas.        

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