MarketBullets® Friday, Jan 3, 2025: Close

     Friday was a red day for grains. Corn lost 8 ½ cents on Friday but is up 18 cents per bushel since the first of December. Beans were down 20 cents and are unchanged since Dec 1. The net effect on wheat prices of the sister grains is neutral at this point. None of the grains tend to move very dramatically without at least a nod from the other two. Corn has been the leader on the upside since October, while beans have been unable to establish a trend for more than a couple of weeks at a time. Not much help here.

     Next Friday’s trade will be sponsored by USDA’s January World Ag Supply/Demand Report (WASDE). This particular report tends to produce some volatility, with final production numbers and Quarterly Stocks-In-All-Positions inventory reports, so many traders may be holding back until the report sets the stage for the year to come.

     Net short-sold positions held by the large speculative trading funds have accumulated to -87,266 short in Chicago Soft Red Winter (SRW) wheat, up from the first week of October at -6,132, about 90 cents above today’s trade. KC Hard Red Winter (HRW) has the same pattern (from -5943 to the present -17681). Chicago has seen only one other period with this amount of “big-trader” shorts since January of 2018. This is ultimately fuel for a quick rally later, but to ignite that little bomb we will need a hot headline or two.

     With Friday’s 16-cent pothole in Chicago SRW, minus 13 in HRW, minus 11 in Minneapolis Hard Red Spring (HRS) and minus 17 cents in Paris Milling Wheat, the wheat price trend is still in a confirmed flat to negative tone.

     It is not time to capitulate, but it is also not time to override the marketing plan. There are strategies that allow coverage of the upside if the concern is “Sold on Low”, otherwise known as “SOL”. It is often less expensive to do this if the forward cost of storage and interest is calculated and applied to the cost of such strategies. Stay on plan. Make the incremental sales on schedule.

Stay tuned, stay cool.      

MarketBullets® Friday, Jan 3, 2025: Pre-Dawn

       One negative factor on U.S. wheat exports has been a Dollar Index up 7.7% in the last calendar quarter. That index does not include the Chinese Yuan in its calculation, but the Dollar has also risen against Chinese Yuan, up 4.73% in that same quarter. All other things held equal, the price of a bushel of U.S. wheat to China has risen the equivalent of about $.27.5 cents since the end of September. Looking at it from the Chinese side of the window, the price of the same quality of milling wheat from Russia dropped 17.3% in Yuan, so that a vessel of wheat at the end of December from the U.S. to China was about $20,000 higher than from Russia. This is not a huge difference, as things go, but it is enough to make U.S. wheat unattractive in any tender, so the decline in wheat purchasing from the U.S. is not entirely political.

     In the international currency market, the underlying evaluation of a given currency is based on its rate of return minus inflation (the “real” interest rate) minus adjustments for economic stability, banking efficiency concerns and other more subjective factors. The U.S. Dollar has been stronger in spite of inflation concerns because of the powerful rise in interest rates in the treasury markets, along with perceived geo-economic risks for the currencies of other nations.

     The bottom line is that the Dollar’s international market value has been rising compared to most other currencies for the last 3 months, and while this factor sometimes gets overwhelmed by other issues, it does have an impact on what wheat costs in the global markets. The Dollar Index is presently at its highest in two years.

     Copper, that essential metal for building data centers, houses and electric cars, is approaching a technical inflection point. The long-term trend remains upward. The red metal has not seen a price failure, but it is sneaking up on a 4-year old trendline support price. The contract can be used as a proxy for global economic growth, so it is worth following. Wheat prices are not directly affected, but a background of economic health is much more positive for wheat prices in the long run.

     We are beginning the new year without a mandate for wheat prices. The only potential large factor visible on the scope is Russian crop condition, as they entered the dormant season in poor condition due to lack of moisture during germination. If the vast Russian wheat hectares fail to receive spring moisture, the size of the crop is definitely in play. For the moment, the market cannot measure this one easily.

     The southern hemisphere does not produce more than about 10% to 15% of the total global crop. They are aggressive marketers and can influence global wheat prices, but the effect is not heavy or long-duration. So far they are in good shape and will not be a price-positive factor.

     At this point in the game, tariff threats are only talk. The eventual application of tariffs in any tit-for-tat progression will likely only be a temporary market factor, but the net expectation is not a positive price-factor in any case. Fooling around with the global flow of food is not a rich vein of political benefit, but it does generate headlines. We shall see.   

     The wheat price trend is flat to negative. The long-term charts show only a series of lower lows and lower highs, the signature of a downtrend, but the current price does not incentivize wheat planting where there is a choice. That is a condition that eventually leads to better prices, but it takes time to show. Downside price risk exists, but is lower than it has been for many months. It is more expensive to hold wheat in storage with higher interest rates and inflation. The math says, “go ahead and sell on schedule”, but there are many producers that are holding back. This will take time to work.

This stuff is trackable. Let’s track it! 

PS – Noticeables:  <Diesel>    <Gold>     <US Dollar Index>    <Ruble VS Yuan>    <2-Yr T-Note>

Good hunting!   

See “Previous Updates” in Top Menu for historical record of commentary.

26 Mules - Skyrocket Hills,

North of Prescott, Washington

North of Prescott, Washington

This chart updated end-of-day only

“Its the 70th year in a row of unusual weather!’ - Winston Mader (1930 - 2016)

“Prayers Work Best When Your Trades Are With The Trend“ - Larry Williams

“When things go wrong, you'll find they usually go on getting worse for some time; but when things once start going right they often go on getting better and better.” - C.S. Lewis, The Horse and His Boy.

“It Don’t Mean a Thing if it Ain’t Got That Swing” - Duke Ellington - 1932

“If I am worth anything later, I am worth something now. For wheat is wheat, even if people think it is a grass in the beginning.” – Vincent van Gogh.

Scroll down Below Text for Charts of Weekly Chicago SRW - Weekly KC HRW - Weekly Mpls HRS

***

Click on any of the following:

<Paris Milling Wheat Daily> <U.S. Dollar Index Monthly> <WTI/Brent/Urals Crude>

Diesel Daily> <Wheat Spreads> <Gold> <Nat Gas> <Interest Rates>

<Historical Previous Update Record> <Carbon> <Special Info Item>

<Weekly Ruble/Yuan> <Fibonacci Spiral>

RISK REMINDER: Always remember that the opinions and information on this site are intended as informative material and are believed to be drawn from reliable sources, but everything herein is subject to error and change without notice, without any guarantee as to accuracy or completeness. The management of physical grain positions and/or the use of futures, options, or other derivatives carries risks that are not appropriate for everyone, and thorough consideration of potential losses should be applied before taking any trading action. Any use of the content here is the sole responsibility of the consumer.

Base (non-annotated) Charts Courtesy of Genesis Trade Navigator.

Updates posted most weekdays and Sunday by 2:00 AM. Afternoon Chart Update and occasional Commentary posted by 2:00 PM. Special Updates with comments as needed. 

We appreciate your support!