Category: Wheat

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Bullish wheat data from the USDA sent futures to new all time closing highs at all three exchanges.

Some contracts traded limit up during the session, but late profit-taking and market-on-close sell orders trimmed gains, particularly at the CBOT and KCBT.

In its small grains report, the USDA slashed its forecast for total 2007-2008 U.S. wheat production to 2.067 billion bushels from its August prediction of 2.114 billion bushels. Other spring wheat projection was put at 479 million, down from 500 million. The USDA pegged quarterly U.S. wheat stocks at 1.717 billion bushels as of Sept. 1, down 2% from a year ago.

CBOT Dec wheat set a new high of $9.61 3/4 per bushel before closing up 6 cents at $9.39. KCBT Dec wheat hit a fresh high of $9.49 1/2 and closed up 9 3/4 cents at $9.291/4. MGE Dec wheat climbed to a new high of $9.14 1/4 before closing up 21 1/2 cents at $9.05 3/4.

With drought being a major problem in wheat production regions worldwide wheat stocks have fallen to dangerously low levels. Should long term climate change be coming into play a shortage of wheat and other agricultural crops could develop that will take prices to far higher levels over the next few years.

With wheat being such a widely used staple commodity a wheat shortage will result in almost immediate highly visible higher prices at the grocery store. With nearly all commodities in up trends look for an alarming dose of food inflation for 2008 and perhaps well beyond.

Wheat for December delivery surged to another record high today closing limit up ($0.30 a bushel) to $8.05. Wheat prices have been in a major uptrend since May when it became apparent that stocks would be under severe pressure as drought continued in major production areas while global demand continues to be strong.

The price action in wheat this year is probably a taste of things to come as climate change makes itself felt around the world. With wheat stocks at 26 year low levels should climate change become increasingly severe we are likely to see wheat and other related feed grain commodities , like corn, move to ever higher levels.

Of course, market volatility will be high so it would be wise not to get too greedy and over leverage your trading positions on this bull move. It is a real shame to be right on market direction yet be knocked out of the trade on a temporary price correction.