Market Matters Blog
Pat Hill DTN Markets Editor

Wednesday 07/28/10
Wheat Horse Has the Bit in Her Teeth

Here's a comment you just don't see that often: "Corn contracts were able to post a solid rally overnight, supported by the wheat market."

That's how DTN Senior Analyst Darin Newsom assessed the overnight session for subscribers in his early word grain comments this morning. One has to wonder how long this market can continue to be unrestrained by what Newsom and many other analysts see as a solid array of bearish fundamentals.

The wheat indexes posted more gains in Tuesday's trade, with the SRW index up 4 cents to $5.36, HRW up 3 cents to $4.72, and HRS up 2 cents to $5.38.

Basis weakened in both the SRW and HRS markets a penny or two and was firm for HRW.

Less excitement elsewhere, with the soybean index and basis unchanged and the corn index off 2 cents.

Overnight traders have set the table for some gains in all three commodities at the opening bell for Wednesday's day session; at 6 a.m. the Chicago Sep wheat contract was up about 12 cents, with corn and soybeans each up about a nickel.
Posted at 6:16AM CDT 07/28/10 by Pat Hill
Comments (6)
Maybe the wheat traders saw the news about an ETF cornering the cocoa market and are trying to do the same thing! They already own the entire projected US carryout, with over 40% of the open interest. The part that is surprising me is that the US dollar seems to be finding a bottom, taking away that excuse. Maybe somebody has a some inside information on Russia? Never argue with the markets. I tried to go short again on Tuesday and we are running a triple top in MPLS Dec right now, so I am going to take my loss and stand aside.
Posted by LeeFarms at 7:47AM CDT 07/28/10
Thanks for the comment. Here's another tidbit from Dow Jones this morning: the wire service reported that Rabobank has raised its forecast for global wheat prices in the next 12 month to $5-$6 from $4.50 to $5.50 a bu. and is now expecting CBOT wheat futures to average $5.50 in the 4th quarter, $5.40 this quarter.
Posted by Pat Hill at 8:04AM CDT 07/28/10
This wheat market is bogus,Every elevator and terminal around here are full of wheat and no home for it.If the traders had to buy and take delivery of this stuff we would not have these big swings in prices.
Posted by Raymond Simpkins at 12:21PM CDT 07/28/10
Every elevator around here? The wheat is all # 1 quality? The wheat market is not bogus. It is trying to tell you something all you have to do is listen. If it weren't for traders you would not have a functioning hedgeable market that farmers depend on. As a long time farmer and former commodity broker my advice is take advantage of what a market gives you even if you think it is bogus, hedge it, but don't "fight the tape"! Jim Davis
Posted by T JAMES DAVIS at 1:24PM CDT 07/28/10
Why don't we just farm paper?
Posted by Raymond Simpkins at 8:41PM CDT 07/28/10
Good discussion on the wheat market. Mr. Davis has a solid point about listening to the market. The noncommercial side is convinced wheat is bullish so it has the marekt on the run. Look at the deferred contracts, particularly new-crop July 2011 and 2012, and you see these issues trading in the upper reaches of price distribution range. If we also listen to the commercial side of the market through the futures spreads and basis markets, we know that the underlying fundamentals away from the headlines remain bearish. Putting the two together, as Mr. Davis stated, one could look to take advantage of the rally the market has seen. For more information on this structural divergence, take a look at the DTN Wheat Strategy. I'm also going to make another attempt at discussing "Broken Markets" in this week's On the Market column.
Posted by DARIN NEWSOM at 8:40AM CDT 07/29/10
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