The USDA report last week produced a mild, short term, market reaction; and prices did finish higher on Friday. But what long term trends might we see from the February numbers? Jim Bower, with Bower Trading, says the numbers released on Thursday were only slightly bullish, but the market psychology is a lot more optimistic since their release, “It seemed like the report cleared the air; and, on Friday, the market said things aren’t so bad. Traders looked at the numbers and are feeling better about the demand for commodities worldwide.” He added that production cutback, especially in wheat, may also be a factor. The global wheat stocks number came in a 248.6 MMT while the market had expected a number closer to 283.13 MMT.
Bower suggests keeping a close eye on the wheat market. He sees this as an area where we could experience a good deal of volatility, “U.S. winter wheat acreage is at a 109 year low; and, when anything gets to a 109 year low, you had better be careful.“ He said, as the U.S. crop comes out of dormancy and enters its yield producing phase, the market will be watching closely because any supply shock due to weather with acreage that low will spark a lot of technical short covering by the funds.
For more information, contact Jim Bower at 800-533-8045.
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