Wheat scarcity alert!
Among the many situations affecting wheat prices today, there is one in particular that bears close attention: argentine exports.
Local farmers in Argentina have been struggling with wheat export limits for the last four years as the government has been imposing restrictions in order to keep domestic prices in check. Or so they say. In turn, farmers responded by slashing production to historical lows. It is this situation -with crops devastated in Russia and the one large exporter, Argentina, which everyone was counting on and now unable to fill the gap- that could keep wheat prices rallying.
3-2-1... Get ready, set, go. Wheat daily futures.
It is very possible that domestic farmers in Argentina may not even meet local demand, which will only make matters worse.
Technically speaking, nothing prevents prices to make a run up to its 2007′s highs almost doubling in price from today’s. Right now, daily charts are showing wheat contracts as if they have completed a weekly profit-taking period with a retracement in prices of about 50%, all of which may indicate a new leg up may be close at hand.
Needless to say, should wheat jump-start another leg up it can push the prices up of all the agricultural complex, including soybeans which are already hitting last
Sept. wheat contracts, monthly chart: still way below its highs.
year’s high. Regarding equities, it may pay to keep a close eye on fertilizers.
However, the best proxy to the grain complex is an ETN that goes by the ticker JJG (iPath DJ-UBS Grains TR Sub-Idx ETN) which is comprised of three key futures contracts: corn, soybeans and wheat.
JJG seeks correlation to Dow Jones-UBS Grains Total Return Sub-IndexSM and has proven to be a solid investment in the last couple of months. Looking forward, investors should also consider how much weight will corn and soybeans futures have in the final price of JJG as corn yields have been set 5 to 10% lower for this year by US farmers while demand from China seems to be on the rise.
I really believe everything has its own time. And nature is still in control. It can stop one country from producing goods and give it to another. Awesome. yes, indeed, demand for our own wheat should increase!
I know the forecast is that for the next 2 weeks, high temperature, dry weather will hit the crops in southwestern Australia. At the same time, some of the wheat producers somewhere in Russia and its close neighbors will be rendered paralyzed from planting the said crops since these areas will remain too dry for it.
The contract has been consolidating and if other grains -like soybean- move higher, it is possible we see wheat follow suit. Go long, boys and girls.
Anthony, no offense, but if you can provide more substance to your hypothesis it will help readers a lot more. Thank you, though.
Wheat is one of our biggest crops and its just such a blessing that we can cover for the scarcity in supply from Argentina and Russia, at the same time, help our country make money through it, specially at this time.
One country’s misfortune is another one’s luck. Demand for US wheat should increase while scarcity in production from competitors abound. Talk about good timing just when we badly need new windows to open for our economy.