CNS Canada –– Chicago wheat futures dropped to fresh contract lows Thursday and have more room to the downside from a chart perspective as speculators continue to add to their short positions, according to a broker.
“It’s a momentum trade here with the funds,” said Adam Knosalla, a broker with Frontier Futures in Minneapolis. “They’re short and are getting shorter as the charts look worse and worse.”
The downtrend, he said, “won’t stop until they run out of bullets, or something bullish happens in the market.”
Knosalla said the soft wheat traded in Chicago will “drop faster and further” than the Kansas City hard winter wheat or the Minneapolis spring wheat contracts due to the fact that the two smaller contracts have a larger percentage of commercial interest that will come forward at the lows.
With no real bullish news on the immediate horizon, Knosalla said the CBOT May wheat contract was facing a nearby downside target at US$4.80 per bushel, with the US$4.50-$4.60 area as the level where buying will likely pick back up.
“I don’t think we’ll stay there for very long,” he added.
For Minneapolis and Kansas City, “we’ll see some more end-user pricing the lower we go,” said Knosalla.
Minneapolis spring wheat has already gained about 20 cents compared to the Chicago futures in the past few days, as its losses have been much less pronounced.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.