Wheat overpriced?

August 16, 2006 10:52 AM

Kansas City hard red wheat and Minneapolis spring wheat crops have suffered drought, late rains and high temperatures, pushing production down and futures prices up. But for Chicago wheat, growing conditions have been just right.

“It’s actually a bearish year from a supply and demand standpoint,” says David M. Fiala, president and chief analyst for Futures One. He expects the contract to move lower and trade between $3.30 and $3.75 per bushel in September. “Chicago wheat is going to struggle for the rest of the year. We need to find export demand.”

“Early in the year, large yields combined with high prices made the U.S. uncompetitive in the export markets and we missed the opportunity to do business,” says Richard Crow of Crow Trading. “Now we have the carry, but don’t have the business.” He targets the same range as Fiala.

It’s all technical now, says Stephen Davis, a senior broker at RJO Futures. “We are right at the 200-day moving

average,” plus, he says the contract is being weighted down by higher than expected USDA estimates on spring wheat production. During September, he expects the contract to trade between $3.60 and $4.00.

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