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Wheat stuck between the bears and bulls

Agriculture.com Staff 09/18/2009 @ 2:56pm

Wheat: There was some actual bullish news for wheat this morning. One US firm released an estimate that all wheat production would go down to 2154 mmt down from USDA’s last estimate of 2184 mmt. They also put out an estimate that projected plantings would be 41.63 million acres which is down from the 43.44 mmt planted last year. So now that wheat was finally given a bullish piece of news how did it react? It was just slightly higher for most of the day but as soon as corn broke its support wheat ended the day being nearly 5 lower Chicago. Right now we will keep the lookout for bullish news in case we should find it but not yet getting our hopes up.

Direction: Right now wheat has to move down to 450 to break out to new recent lows and continue moving lower. It needs to trade above 446 to break a long term down trend line from the 725 high before we can start to get too bullish. For the moment, it can be said that wheat is stuck between a bearish and bullish level but we will choose to side with the trend until shown otherwise…Ryan Ettner

  • Chicago Wheat: (09/14) Bought Dec 460, risk 446, objective 484. Closed 457 1/4.
  • KCBT Wheat: (09/03) Stand aside.
  • MN Wheat: (09/14) Bought Dec 501, risk 492, objective 514. Closed 496 3/4.

Option Strategy(s):

  • (09/10) Sold Dec Chi 500 call 11 3/4, risk to 15, objective 0. Closed 9 1/4.

***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 traded in a very small range today, but held just above the 10 day MA. This market has refrained from posting a new contract low all week. We cannot confirm a bottom though until the downtrend gets taken out.

Vital Technical Indicator: the next schedule projected major turn day in store for wheat is September 25.

Live Cattle: USDA counted 2.4% more cattle going into feedlots during August than last year. That was just above the .9% higher estimate from the average guess but under our 4.5% higher expectations. We cannot argue with this number. Placements were higher because corn is low priced, deferred live cattle futures were projecting breakeven are a small profit, and also because 2008 placements were limited in the fall. Keep in mind from August through December 2008, its placements ranged from 3% to 11% lower than the previous year. The leaves a pretty good chance of 2009 placements showing higher than last year numbers all fall.

Placements In-Depth: One of the confusing things to new traders monitoring these reports is the fact placements do not quite match up with marketings an exact four, five, or six months down the road. Each month we have quite a variation in the size and type of cattle going into feedlots. There is a mix of anything from freshly weaned 450 lb heifer calves to 925 lb feeder steers. Additionally, cattle that are feeding during the winter months take longer to get to a target weight than numbers fed in more mild temperatures. To give you an idea of the mix laid out here, cattle placed on feed in August will finish out anywhere from late December through April.

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