Iran announced it is seeking 100,000 tonnes of milling wheat and the trade acted in a bearish manner the tender was not larger after rumors of their monthly needs were going to be 1 million tonnes per month through March 2009. Allendale suggests after Iran's recent 3 million tonne purchase, additional needs may be closer to 1 to 2 million tonnes by next March. Ukraine raised its grain production estimate to 43 Million Metric Tonnes (MMT) versus 40 MMT despite recent flooding in the western region; there harvest is 53% complete.
Cash wheat at $5.61 requires 4.3 cents of carry per month. If not hedged, make certain your local cash markets are offering you sufficient carry. August 1 to Sept 1 cash markets may offer as much as 10 cents per bushel to carry wheat and may be cost effective. The present September-December wheat futures spread is offering 25 cents carry (actual cost is 12.9 cents). Allendale has 65% of anticipated 2008 wheat production hedged in the December futures. We see no reason to hedge new crop above the 65% level we have on for now.
Dating back to 2000, odds favor a national cash wheat peak for the month of December. Of the most recent eight years, dating back to the year 2000, the national cash peaked has hit the month of December 50% of the time with various other months such as October and November, April and May only once. We will monitor cash and futures spreads and the history stated above to make our decision to make initial 2008 cash sales.
Technically the wheat market is neutral as explained within our Allendale Advanced Charts. 7980 is support with the 50 day Moving average containment. Fundamentals are bullish as USA demand is more positive than year ago levels. Declining Spring Wheat conditions is also supportive to futures.
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