Wheat ” Is Promising Harvest Enough For Middle East Drought”

Lets start on the fundamental side of things. Canada, US and Australia are key players in the price of wheat in the upcoming months.

Australia had the driest month of May on record. Also according to the Australian Bureau of Meteorology most of the country received below average or very much below average rainfall March 1 through May 31. Those are key months for Australia due to those are sowing months for wheat.

In the Eyre Peninsula, west of Adelaide the South Australian capital, some Farmers skipped winter wheat plantings due to the rising costs of seed, fertilizer, and weed killer. (approx. $60.00 / acre not including wages) Also on mere projection on rainfall or lack there of.

If all goes well, we could see next to normal wheat harvest at 23.7 million tons verses 13 million tons in 2007.

Drought in Iraq slashed domestic wheat crop, forcing Iraq to import more than the usual 3 million tons per year. Pakistan is also suffering from wheat and flour crisis. Pakistan is planning on importing 2.5 million tons of wheat this year. As it has failed to production targets.

Even with Canada’s wheat plantings up 8% to 16.4 million acres and the USDA estimate for 2008-2009 ending stocks at 487-537 million bushels. Will it be able to keep up with the drought in the Middle East. Australia’s rainfall maybe the key to wheat prices in the upcoming months.

Technically speaking we are looking at December 08 wheat futures at support at 800.0 – 820.0 for the past couple days. We may have a break through down to the 770.0 level. Anything below 750.0 would be the continuance of the bear market in wheat.

Ten day RSI is at 36.91 and stochastics are in the over sold area. Open interest has been staying around the 98,000 level since the last down trend with volume picking up. If we can get back up above the 200 day moving average we should see a test to the 1000.0.

Wheat, since 1969 has been up 33 out of the past 39 years. (past performance is not indicative of future results.)

Trade recommendation is to purchase a bull call spread. Buying the December 08 Wheat 900 Call and selling the December 08 Wheat 1000 Call at 18.4 or $925.00. Exit strategy if market goes against you would be to liquidate position if the underlying futures contract closes below 768.0 or if the spread losses 33% of its value. Exit strategy to the profit side would be to liquidate half of your positions at next level of resistance. Which is 940.0.

Second trade recommendation would be Buy December 08 Wheat futures contract at 820.0 or lower and purchase a 820 put option for 67 or $3,350.00 . The in the money put option is about half the margin required for the futures contract. Use same exit strategies.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.

To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.