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Gary Hofer: Market Bullets

I ts "Whack-a-Mole" days for wheat. Every time the market pokes its head up, the sellers bop the poor lil' crittur on the head, sending it down another dime each time. It gets pretty tejus if you happen to own any unprotected wheat. The power of the market to exceed expectations is marvelous.

Wheat harvest is discovering good yields across the northern hemisphere, even in the drought-plagued southwestern US wheat belt, with USDA's latest report of progress for all US wheat harvest at about one-third complete and yields improving as the machines work northward through Kansas.

Soft red winter wheat harvest has been delayed by the same wet weather that is will ultimately increase overall expectations for corn and soybean yields this fall, leaving the market with a net negative balance of price news. It is old information, for which futures prices have already accounted, but the momentum alone is enough at this point to keep big price rallies under the hammer. Eventually the sellers will be exhausted, but for now it doesn't seem to take much to scare away the buyers.

USDA will be bringing major reports Monday morning, with this year's planted acreage and June 1 quarterly inventory numbers. Various pre-report acreage estimates range about 1 million acres either side of last month's report, while the average trade pre-report guess for stocks on hand is around 597 million bushels, 121 million less than last year's June report.

This is still not considered historically "tight", although this time last year, Chicago July wheat prices were trading just under $7.00 per bushel, $1.00 higher than present values. When there is little else upon which to focus, the market sometimes over-plays USDA reports. Volatility and spiky behavior are likely to be a big feature of Monday morning's wheat market action.

In order for the downward channel to be broken, Chicago September futures will have to rise above at least $6.07 to attract enough attention to sustain the move at all. That is a 27-cent move up from Tuesday's close, not a huge distance as this market goes, but very difficult if corn and soybeans do not render assistance. Being a buyer here may take some real patience and quite a bit of capital to hold on.

In the background, with a relatively stable global economic period in session, many companies, new and some not-so-new, are becoming publicly owned by offering shares for sale on global exchanges. In the past, such an increase in IPO (Initial Public Offering) activity has often been- a feature of a general market top. Among the more interesting of such is the rumble about Alibaba, the "Amazon of China". This Chinese retail juggernaut could constitute an acceleration of the geo-shift in retail business and the biggest IPO yet. The implications are profound and fascinating. Stay tuned.

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.

 

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