Technically Speaking

Monday morning, the U.S. Dollar Index September futures plunged to lows not seen since early March. That would normally be very supportive for U.S. wheat export prospects as our wheat becomes cheaper to world importers. That, coupled with the anticipated sharp decline in major exporter world wheat supplies including those from the Black Sea and European Union, and the newfound competitiveness of U.S. wheat FOB prices should surely bode well for a rally. Oh, and add to that a combined net-short position by managed money funds of close to 120,000 contracts combined between Kansas City and Chicago, and the near-record short positions in corn and soybeans, and you have the recipe for some sort of price rally. However, early Monday, the ongoing slide in world equity and energy markets seems to be taking a front seat to wheat fundamentals.

The weather features another 10 days of rain for the Russian spring wheat belt, compromising quality and quantity; excess rain has impacted France and Germany yield and quality as well. I've got to think that not only cheap U.S. soft red winter, but also high protein U.S. winter and spring wheat, will be sought by world millers. Only time will tell. However, right now, the bears are still in control.

The September bean oil futures contract fell to another new contract low early Monday. This is a market that is getting very overdone to the downside, especially following big losses in EU rapeseed and the ongoing dryness in Canadian canola areas. Part of the reason for the recent price plunge is surely the fall in crude oil futures, which have moved more than $11 per barrel lower in the past month. The situation in the Middle East bears watching as tensions appear to be flaring over there again early Monday. Any additional military action in that region could set off a short-covering rally in crude, which would surely help veg oil prices, as well as boosting biodiesel usage. Keep an eye on September bean oil for some sort of recovery. However, with traders and analysts touting the potential for record soybean yields, the upside could very well be limited in the short run.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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