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Wheat Prices Stuck in Neutral


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Wheat Prices Stuck in Neutral

CURRENT STATE:

WHEAT:Wheat prices have been stuck in neutral for the past couple of weeks. A strong world harvest continues to keep Wheat price subdued, albeit, in the US, farmers tend to argue otherwise. Most of those following Wheat tend to only care about what goes on at home i.e. US analysts, and often ignore other parts of the world which are major producers of the stuff. I, on the other hand, look at Wheat and its price holistically given the importance these regions are to world supply and demand imbalances. Yes, Im back to the Russian harvest and this is just one example of the increased supply hitting the market. Russia along with many European countries are exporting at an alarming rate adding to the glut of an already swelling supply chain. It really doesnt matter what the US does in terms of exporting Wheat other than they will only export if the price is right. Last week I wrote about the rains in the Midwest and how this will improve sowings for the coming year. I also, if you recall, upped my estimated yields for next years crop by a factor of 1.10 i.e. US yields. As for an update, the rains over the past week in the Midwest i.e. all the way from North Dakota to the panhandle of Oklahoma was good thus further supporting my next years estimates. An average harvest this year will result in a good harvest next year. In the short-term, I see Wheat prices holding steady and/or drifting slightly to up and downside with not particular direction. I still have a buy on Wheat, albeit a weak buy. In any event, even though wheat prices are still in dire straits, Im still long the commodity on a day-to-day basis but watch this space!

Where one algorithm points up and the other points down, Ill stay with the short-term bounce and stay long. This is a day-to-day call, however so watch this space. In short, there is still WAY too much of this commodity just hanging about, and this always spells Sell.

MORNING CALL and Recommendation:

We are Long @KW given both Algorithms point to the upside.

POSITION:

Long: @KW (Hard Red Winter Wheat)

Price: 426.25 (8/29/2017) (continuous contract; contract adjusted)

Current Price: 452.75 (9/25/2017, 8am CST)

PROFIT/LOSS:

+262.50 (as of January 2nd, 2017; per 1 contract)

FULL DISCLOSURE: Short KW

For farmers/producers looking to put on a hedge please give me a call for a no obligation free quote. Ill be more than willing to visit your farm and explain how a hedge works, obviously at not costs to you. Please visit our website: www.royalhighlandadvisors.comor call me at 920-319-1444. Email: phil@royalhighlandadvisors.com, phil@agriskconsultants.com, phillip.mcknight@bath.eduorphil.mcknight@alumni.ucla.edu.

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About the author


Phil McKnight has a Bachelors Degree in Accounting from the University of Arkansas (Fayetteville), a Masters in Business Administration from Northeastern University, a PostGrad Diploma in Personal Financial Planning from the University of California (Los Angles, UCLA), and a PhD in Finance from the University of Bath (England, UK). Phil graduated with distinction/summa cum laude from UCLA.

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