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Too Much Wheat on Years of Record Harvest


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Too Much Wheat on Years of Record Harvest

CURRENT STATE:

WHEAT:Wheat prices continue to be subdued by the enormous glut of the stuff brought about by years of record harvest. A more recent USDA report predicts a larger than expected spring Wheat crop for next year of which is bearish news for the commoditys price. For those that follow my weekly column Ive made the bold prediction (well in advance of the USDAs dire forecast) that estimated yields for next years crop should be increased by a factor of 1.10 i.e. on US yields, to compensate for the fact supply simply outstrips demand. Over the short-term I dont see Wheat prices moving anywhere anytime soon given the world is awash with the stuff and farmers continue to over produce. Really, the only catalyst that can tighten supplies would be to plant less and my channel checks indicate this isnt an option among farmers, at least for the moment.

With that in mind, I personally do not see any catalyst that will drive prices from their current short-term mean. The possibility of a strong Wheat harvest is a very real possibility and this psychosomatic state among traders will continue to keep Wheat price subdued.

In short, 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! Farmers, its not too late to lock in a hedging strategy for next years crop, so give me a call. I have a strategy that could benefit you.

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: 441.50 (10/9/2017, 8am CST)

PROFIT/LOSS:

+251.75 (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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