By John DePutter – March 13, 2018
“July Kansas City wheat is up more than a dollar a bushel in 2018 – a substantial move that was unimaginable back in December when traders were focused on 2017’s record global wheat harvest.”
– Progressive Farmer, Mar. 7, 2018
What it Means:
What’s interesting about this story are the words “unexpected” and “unimaginable.” The rally in wheat was neither of those things, for readers of Ontario’s Ag-Alert and Western Canada’s DePutter Market Advisory Service.
The news systems of the world tend to focus on fundamental forces that have already occurred. They are not forward thinking. In fact, sometimes when negative fundamental factors seem the most overwhelming is when a market is actually forging its lows.
For many weeks, our services pointed out that the negative streams of supply news were not necessarily bearish. Readers knew large global stocks would limit whatever rallies might take hold, but would not keep the market from rallying at all.
Readers were advised that wheat futures were getting increasingly crammed with big fund short sellers, who would someday collectively run to cover their shorts, thereby driving prices at least moderately higher (which recently did take place).
Here’s what we said in the wheat section of Dec. 15, 2017 Market Advisory Service newsletter:
“Chicago and KC wheat futures keep grinding to new lows and could go lower yet, but these markets also look like they’re getting close to the end of the bearish line. A short-covering rally by spec funds could lift them near year-end.”
Bottoming signs seen; Good tone
It was also pointed out that chart patterns portrayed bottoming signals. Wheat futures were forming basing-type formations.
Plus, it was observed that the market was only falling slightly despite a drumbeat of bearish news. We noticed that futures were increasingly unwilling to fall even after severe negative USDA supply and demand reports. That was proclaimed to be a sign of “good tone.”
As well, it was noted on various occasions that the low prices seemed to be functioning to cure low prices by sending signals to US farmers to seed a second year of near-record low acres to winter wheat.
In effect, the gains for wheat over the past two months have really been no surprise at all.
Upside seen in corn as well
We also such much the same thing for corn. Indeed, a special report identifying a major cyclic low for corn was sent before the biggest part of the recent corn market rally took hold. Note: That special report is available to anyone who signs up for an Ag-Alert or Market Advisory Service newsletter free trial.
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