Wheat: Here's Something That May Surprise You

What's the deal with wheat? It simply can't seem to buy a rally at the moment. From a chart perspective the trend is clearly bearish and any attempts at a rally should be sold. But where is a rally going to come from?

Lets take a closer look at the charts for the popular wheat contracts:

Australia ASX January, fallen from a high of A$392 on 21st Aug to a close of A$319/tonne this morning (losing 18.6% during this time). During that time the contract has closed higher in just one out of fifteen sessions.

US CBOT Sep, fallen from a high of $9.31/bushel on 21st Aug to a close of $7.11 1/2 last night (losing 23.5%). Closed higher two sessions out of the last thirteen

LIFFE Nov has declined from £128 on 21st Aug to a close of £111.75 last night (losing 12.7%). During this time its closed higher twice out of thirteen.

Paris Nov, down from EUR200.80/tonne on 21st Aug to last nights close of EUR168.75 (a loss of 16%), closing lower for fourteen sessions in a row.

Pedants will note that Australia has had one more session during this period as we already know their close for today. We and the US have had one less than Paris due to public holidays.

None of these markets has closed higher more than two sessions in a row during this time.

On the supply side the last major exporter to wrap up the northern hemisphere harvest is Russia.

Their crop is getting bigger by the day. Lets just say government estimates would appear to have been deliberately conservative. Their harvested crop is bigger now than official estimates as recently as a month ago for their entire production and they still have 30% to cut!

After that attention turns to the southern hemisphere.

In Argentina the primary growing state of Buenos Aires, which produces about 50% of their total, appears to be in good shape for now, but timely rains are a must even for them.

In Western Australia, which produces almost half total Oz production, conditions are average, certainly some moisture over the next few weeks would help the crop there enormously. In the East, Queensland, NSW and Victoria recent rains appear to have got the crop pretty much made.

Question marks over Australian & Argentine production will be more than comfortably matched by increased output from the Black Sea.

In the UK an abundance of low quality wheat may struggle to find too many export homes and prices must be low enough to attract feed compounder interest.

The most striking thing to me from the figures above, is that despite everything, UK wheat has actually fallen LESS during the last three weeks than wheat on any of the other futures markets.

Given that all the other contracts are milling wheats, and that the world is particularly awash with feed wheat that seems rather strange. Wheat sub-£100 anyone?