A Headline- Dominated Market

 

March 20, 2014



The price of wheat is stronger now than at any point since last fall in late October. Many market observers are citing the Ukraine/Crimean crisis as a factor, although the winter wheat crop planted in the Ukraine is in reason­ably good shape and there have been no interruptions in export activities.

The Crimean deep water port of Sevastopol is not a major export point for Ukrainian wheat, with only a small percentage of their grain moving through that point. Still, the potential for violent disruption of busi­ness activities presents an unknown factor, and mar­kets as a whole do not like unknowns, tending to react by adding "risk premium" to the price.

As political and eco­nomic pressure rises be­tween the European Union and Russia, the focus is not on agriculture. It is natural gas and crude oil flowing through various pipelines from Russian sources that become the rub. In the past, when disputes have arisen, the seasonal temperature factors were in Russia's favor. This time, European energy buyers are under less duress.

Energy markets seem not too concerned, as the price of WTI crude oil traded in New York has declined from $105 per barrel to just under $100 as of Tuesday. Brent crude, most relevant in Europe, has declined from a spike high on March 3 at about $112 per barrel to a under $109 on Tuesday. When the situation becomes more stable and transparent, we will move on to other factors. For now we have to live with a headline-domi­nated market.

Meanwhile the condition of the northern hemisphere wheat crop is subject to weather-based revisions almost daily, another risk- premium-adding factor. US wheat crop conditions as measured by USDA's National Agricultural Sta­tistics Service (NASS) have declined a percentage point or two again the last week. Kansas showed 34% good- to-excellent condition com­pared to last week's 37%.

US export sales commit­ments continue at a good pace, now standing at the fourth-highest year-to-date total in the last 14 years. Egypt completed a purchase of wheat Tuesday including Russian, Romanian and US origins. Most global buyers are avoiding Ukrainian of­fers for the moment.

Anxiety continues at higher than normal levels in the wheat market. The trend line is still upward. The technical side of the market is getting extended and the upward move is maturing, now more than 33 trading sessions, almost two calen­dar months of age.

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.

 

Reader Comments(0)

 
 

Powered by ROAR Online Publication Software from Lions Light Corporation
© Copyright 2024