Wheat, What Now?

Wheat closed over 480 last night for the first time since 8-19-2016, nearly a year ago. It’s way too early to declare that a new bull move is forming but it is clearly getting the attention of fund traders and shorts are exiting the contract.

So now what? Basic fundamentals tell you that highs are formed at harvest time in short crop years. We knew that 2017 would be a short crop year considering that we seeded the fewest acres in 100 years. On top of that, we now have a devastated crop in the Dakotas, issues with wheat tributary to the MGE (MGE wheat traded $7 this week for the first time in 10 years) and the crop in the Southwest isn’t exactly a bin-buster.

We have had 3 consecutive days in a row with a close higher, that signals a least a short-term trend change. Stochastics are over-bought but they may stay that way for some time now. I will ignore signals from that indicator for the short-term. I’ve drawn retracement lines on the chart that measures from the life of contract high which is eventually the value we will have to use if wheat has begun a longer term bull move.

My sense is that we have put long-term lows in the wheat market which will be influenced greatly by the Farmer’s response this fall when he considers seeding wheat. An increase in seedings this fall will temper a long-term rally in the futures market.