Commodity News Service Canada – U.S. wheat futures are trading just above their weakest levels in 10 years, but the lows may be in for the time being as funds are already holding large short positions and attention turns to problems with the European crop.
“We’re really just following the EU,” said wheat-broker Austin Damiani, of Frontier Futures in Minneapolis.
After trending down for over a month and hitting 10-year lows on July 20, U.S. wheat futures managed to rally in recent days in sympathy with the French Matif milling wheat futures and reports of lower EU yields, said Damiani.
French wheat prices were down again on Tuesday, July 26, which had the funds back adding to their short positions in the U.S. wheat futures as well, said Damiani. However, he added that the funds are already holding a near record large short position in Chicago wheat, and “may be running out of bullets.”
As a result, he expected “the contract lows will probably hold.” The bearish harvest pressure influence is largely factored into the futures, with the U.S. winter wheat harvest now 83 per cent complete according to the USDA.
Meanwhile, problems with the EU crop could trigger a further rally there, which would spill into the U.S. futures, said Damiani.
However, the situation may be slightly different for the spring wheat futures traded in Minneapolis. While the U.S. winter wheat harvest is nearly complete, the spring wheat harvest is only just getting started.
Damiani said the Chicago and Kansas City contracts will follow the EU situation more closely, with any rallies in those markets likely leading to increased farmer selling on the spring wheat side as harvest pressure picks up.