Wheat prices contnue a traceback
Wheat has been the 'golden child' of the grain markets the past 12 months, with the pinnacle in February when HRS wheat futures hit $25 for a high. This was quite an achievement, and has pretty much put the frosting on the wheat cake for this year, and perhaps even for decades. Cash HRS wheat prices are now worth less than half of what they garnered just 2 months ago - a remarkable change in a short period of time.
Wheat prices have dropped steadily since then, taking new crop Chicago wheat down below the $8.50 level after tipping the $13 level earlier. This is a huge price move for wheat growers, and one that at this point looks like an opportunity wasted. Not only have 2008 wheat prices dropped solidly, but 2009 and 2010 have dropped hard as well from previously dramatically high levels.
While wheat has become the ugly sister after its two month metamorphosis, one has to start looking at the corn market with its current $6+ price level as being vulnerable. Of course, we all know corn planting is lethargically behind normal, with progress at a terribly slow pace for now. In fact, weather forecasts haven't changed while corn prices have hovered for the past few weeks. The volatility is there, but so far corn doesn't appear to have any technical appearance of topping.
With wheat prices clearly retreating from previous highs, wheat is starting to become priced as a feed grain - a dangerous development for corn. Corn growers can start to get nervous when they see the $5 break in wheat prices to the point where it might start entering feed rations again. Corn fundamentals look impossibly bullish for now, but as all grain traders are aware - things are always the most bullish at the top.
Soybeans may be the sleeper here, with weekly technicals showing two upside weekly reversals in the last 4 weeks (one on the week of March 30 acreage report - a very bearish report which gave us a unusual weekly upside reversal). The most recent upside reversal was last week, when wheat prices took a tumulus turn lower. It used to be that a grain was a grain was a grain, and all grains moved the same direction. That is clearly no longer the case. Corn prices are bidding at $100-$200/acre profit price advantage over wheat or soybeans, a development that has occurred since the March 30 report. It's likely to attract more acres, but only the weather can provide the final answer to how many more acres.
So if you are a producer of corn or wheat, perhaps you should be afraid, very afraid, of the recent market developments. But, what about a soybean grower? While wheat has become the ugly sister in the grain marketplace, soybeans may be the ugly duckling this spring that could turn into the beautiful swan by next harvest! Today, corn might be the best sale on the grain planet, and perhaps an opportunity that we should not let pass us by?
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