Access your Corn, Ethanol and Soybeans Reports Here

Technology at its BEST!

The perfect execution platform for the electronic futures trader looking for SPEED and RELIABILITY. Arc Capital Management is an Independent Introducing Broker providing institutional clients, professional traders and financial investors with the means to help you achieve your goals. Try our Complimentary Platform Demo.

The USDA wheat numbers were released June 10 with no real surprises. The market was expecting a bigger crop and it was received. According to the report, Soft and Hard red production numbers are up 2 percent from last month, totaling 572 million and 1.03 billion bushels respectively. Total winter wheat production is up 2 percent at 1.82 billion bushels. The U.S. yield forecast is at 45.3 bushels per acre, up 1 bushel from last month. The current yield numbers are up 3.1 bushels from this time last year and grain area remains unchanged since May 1st, holding at 40.2 million acres.

Below are the world production number put out June 10th by the USDA in thousand metric tons:

If you cannot view the World Production chart above, go here.

Global wheat production is up this month with higher than expected numbers from the U.S. and China and drought concerns are not nearly the concern that they have been over the past few seasons. The Australian and Black Sea regions are expecting adequate weather conditions over the next season or two. Although Australia has been the focus of concern for the last couple seasons, a report by RealClimate shows that current conditions are not an abnormality and that the expectation is for a gradual increase of rainfall over the coming years. Global wheat imports and exports are currently up as well with higher feeding and food use in China and higher feeding in the United States but that trend may quickly change.

We have seen more and more bears emerge as we climb to arguably unsustainable levels. With SRW harvest already underway in the south, we are sitting on potentially huge crop with reports of decent to good crop conditions across the board, with notable exceptions of drought conditions reported in Afghanistan, Argentina, and Syria. The effects from these troubled areas remains to be seen.

Looking only at wheat, the stage is set for continued downward pressure as traders realize crop conditions are good and the number may be there to satisfy the huge demand we are currently seeing. This may not be the case for long as wheat will more than likely see some spillover support from the corn market. Corn yield and acreage numbers are being cut due to adverse weather conditions that are threatening newly planted acres and slowing the completion of the planting season. We are hearing reports that a number of acres originally designated for corn could be going into beans as the corn planting window diminishes as the season passes.

Provided we see this scenario continue, expect additional support to come into the corn as the market starts to experience supply and quality concerns due to lower projected acreage and yields. With corn prices rising, we should continue to see some spillover support in the wheat markets and increased wheat feed usage that will limit downward pressure.

Cash market activity has also seen a gradual decline in both winter and spring crops. Export expectations by the USDA for U.S. wheat has also been cut, which may be related to the strengthening U.S. dollar. Economists expect this trend to continue therefore export expectations could be lowered across the board for the third and forth quarter of 2008 and possibly into 2009. The September dollar index continues to challenge the 74.00 level and technically a long-term bottom could well be in place. This has been supported by recent Fed comments therefore traders will start to focus on world rates and fluctuations.
As of this writing, in Chicago wheat we have seen a 52-week high of $1272'6 for the July contract, reached on March 13, 2008. This morning, after the overnight session, we are sitting at 792'2 for the July contract.

Technically, Chicago wheat has been relatively predictable. The July contract, which will continue on the front step until June 30th, shows technical support points around 782', 750' and 711'. Technical resistance appears to be near 839', 874' and 1000'. For the September contract support points appear to be at 797', 760' and 729'. September Chicago resistance comes in at 851', 857' and 934'. Further out, in December, support appears to be near 820', 780' and 725'. On the upside we see resistance at 870', 930', and 952'.

Unlike the soybean market that has given spread opportunities, such as the recent zero carry trade, July versus September Chicago wheat has kept the line as well as September versus December. Kansas City versus Chicago has not given many opportunities either but Minneapolis versus Chicago continues to provide plenty of volatility in all contract months. Currently the July spread is trading around $1.88 and we do expect this to narrow over the summer.

Technology at its BEST!

The perfect execution platform for the electronic futures trader looking for SPEED and RELIABILITY. Arc Capital Management is an Independent Introducing Broker providing institutional clients, professional traders and financial investors with the means to help you achieve your goals. Try our Complimentary Platform Demo.