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Kansas Wheat Innovation Center

Market Analysis: Wheat Price is Dropping

May 21, 2013

Disappointment describes the feelings for bullish traders and wheat producers at the end of this week of trading. Until Thursday, the wheat price held major support found on the charts. The price action the last two days of this week leaves one to believe that the seasonal down trend in the wheat price has just began.

This week’s negative developments included a 21 ½ cents loss for the week in the July Kansas City wheat contract. The price settled below the last reaction low. The price dropped below the 50-day moving average. The lines on the 50-day moving average show a slow decline. The lines on the trend indicator crossed and now point down. On Friday, the wheat market separated itself from the corn market as the July corn contract posted double-digit gains while the wheat price sold off. The list of this week’s action illustrates the bearish attitude that has attack the wheat market.

Wheat harvest is fast approaching in the Plains States. In the western region, insurance adjusters have/are making their rounds. It feels like the wheat market has factored in the loss in bushels. Maybe the market underestimated the amount but that will be determined later (harvest).

The next paragraph was in last week’s comments. Last week’s fear is this week’s reality. Action is important by producers who have a good chance at harvesting a wheat crop. As a famous comedian says “Get Er Done”.

WHEAT PRODUCERS: The wheat market is at a critical point. The technical picture is suspect for a sell off. The seasonal price tendency leans to the down side. Keep a watchful eye on the charts. If the 50-day moving average is penetrated, one needs to become an aggressive seller. Forward contract, sell futures or buy put options. It is that time of the year.
 

Tom Leffler
Leffler Commodities, LLC
2901 Lakeshore Drive
Augusta, KS 67010
866-468-6866

Larry Glenn
Frontier Ag
Quinter, KS
785-754-3348

PLEASE NOTE THAT THERE IS AN INHERENT RISK OF LOSS ASSOCIATED WITH TRADING FUTURES AND OPTIONS CONTRACTS EVEN, WHEN USED FOR HEDGING PURPOSES. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTIONS CONTRACTS. FUTURE’S TRADING IS NOT SUITABLE FOR ALL INVESTORS. OPTIONS CAN AND DO EXPIRE WORTHLESS. IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIMUM AND OF ALL TRANSACTION COSTS.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST SEVERAL YEARS. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAYAFFECT THE RESULTS.

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