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Market Plus: Jul 25, 2003

posted on July 25, 2003

Market Plus: Jul 25, 2003

Pearson:And welcome to the Market Plus segment here at our Market to Market Web site, glad you've joined us. Be sure to tell your friends. Doug Hjort, our analyst this week, and Doug comes from wheat county originally, he knows the wheat market about as good as anybody. And it's been a bullish week, soft red wheat in Chicago up about eight cents for the week, Doug. It's been in a real bull trend. You're the earliest person to have called the bull trend in wheat. I asked you if it was going to last and you kind of hedged a little bit. Now, soft red wheat has some problems of its own, but what about Kansas City and Minneapolis?

Hjort:The Kansas City, Minneapolis markets, well Minneapolis of course has to go through their harvest up there in the northern plains yet and that pressure, but Kansas City, you always figure that the bulk of the harvest is done when they're through in western Nebraska and so on. We still have Montana to go and that's kind of a separate market going off in a separate direction out to the West Coast primarily.

The long-term picture on wheat I think is very bullish, um, because of this very tight world supply/demand situation especially as it relates to the food grains, wheat and rice. Um, I don't know how far up we can take these prices because obviously there becomes a barrier there when you're talking corn prices at loan rate or whatever. You know, wheat can go significantly above corn price but it's going to be an anchor on there. So, unless the corn turns and goes higher for whatever reason and few reasons to see that now, I think the wheat price will continue to rally but maybe have some slow down.

Our export sales have been much better so far this marketing year. For wheat, your marketing year begins June 1, much better and we're up fifteen, eighteen percent from a year ago, now that's not great news because a year ago we were record low, record slow start. But we are better and that helps. This past week, of course, our export sales number was quite low. So, the market stuttered a little bit here.

We also have on day charts in the Chicago market a, what they call a hook reversal, and I'm not really a technician but what they tell me, that was a new contract high and then it closed lower that day, that was Thursday. Then on Friday you closed lower again. So, then they call that a key reversal. Well, to technicians, that's an important thing and the speculative trade really is dominated by technicians, not so much fundamentalists. So, that's why I think the Chicago market might have a little trouble as well as what I said on the show, that farmers will be making some sales too.

But long-term I think by November or so, I think wheat prices can be consistently higher, so sales are not advised right now.

Pearson:I want to follow up on, you were talking about this Canadian situation again and we don't know, no one seems to know when this thing is going to end. You're talking about the trade, thinking, you know, probably through Labor Day, this ban is going to continue but no one knows. From a marketing standpoint, what are you telling producers to do?

Hjort:I think buying some puts on the October, maybe even December contract is worthwhile. A seventy-four dollar put on October this week, you could have gotten on as low as a buck and a quarter on up towards the first part of the week, a buck eighty. Well, this week, for example, your cash price jumped two to three dollars. As long as that ban stays on, you know, all prices, futures and everything probably will keep going up but the cash prices certainly will.

But when it comes off then there's going to be a big hard down and you might look at that, get a hold of your broker, and talk about switching that over then to a straight futures position to be able to ride that on down. But that's something for you and your broker to look at. I think in the meantime, buying a put, investing a buck, buck and a half for protection is really a pretty good idea.

Pearson:Some pretty good insurance, some great ideas as usual. Doug Hjort, thanks for being with us on the Market Plus segment of our Market to Market Web site. For all of us here on Market to Market, have a great week.


Tags: agriculture commodity prices markets news wheat