Gary Hofer: MARKET BULLETS

U.S. national winter wheat planting reached 19% as of Sept. 20, down 4% from last year and only 1% off the five-year average.

USDA on the 21st rated topsoil moisture in Kansas at 59% adequate to surplus, Oklahoma’s at 49% and Texas at 32%.

Washington’s winter wheat crop is 55% in the ground, versus a 56% five-year average. Idaho 27% in v. 24% normal, Oregon 19% v. 15%. There is no stress on the market from these stats!

Corn harvest is just beginning to roll, with 7% done versus the 15% five-year average. Soybeans 3% in the bin versus 7% normally by now. Ho Hum!

The wheat, corn and soybean markets, always sensitive to each other, are all showing a “carrying charge” price structure, which only means that each trading contract from nearby to later deferred months is a little higher than the one preceding it. For Chicago wheat, that means contracts for December delivery are at about $4.97, March of ’16 shows $5.04, May of ’16 is at $5.10, and so on into the future.

This is normal, as it costs a few cents per bushel per month to store wheat. The longer the stuff is stored, the greater the cumulative cost.

When the later months are trading higher, the market is speaking a message, “Hold onto your wheat in storage for a while and I will pay you a bit more to compensate for the costs”. This is the way a futures market looks when there is plenty of supply available for now; lower prices for delivery today than for delivery later – the picture of a market that has no scarcity.

Those who own would like to own wheat are getting precious little encouragement from this market. It is certain that the risk of owning wheat is much less today than it was just a couple of months ago, with prices as high as $6.00 per bushel compared to under $5.00 today.

Still, If you bought Chicago December futures on the first trading day of last August, we have come exactly nowhere since then (never mind the quick trips up to $5.03 and down to $4.63 in between).

Looking at the road ahead, which is what futures markets exist to do, we have a large corn and soybean harvest that may come off in record speed if the weather report is correct. We know that there are many sources of wheat for sale from countries that have zero incentive to hold onto any surplus wheat.

We have a strong and growing stronger U.S. dollar, making U.S.-origin wheat more expensive across the very competitive global markets. We even have Donald Trump still in the lead! All factors that speak of a very boring wheat market for some time to come (well maybe not the Trump factor).

The short-term trend-line is sideways to just a wee bit upward. The longer-term lines are negative. Trading wheat in this environment is not going to make anyone rich. Keeping wheat in the bin is expensive in the long run. But of course there is always hope…

Information and opinions contained herein come from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital.