Wheat: The Wizard and Wall Street
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  • This spring wheat supplies are at the heart of the wheat complex strength as we make our way toward winter.  
  • Old-crop HRW will likely see spillover support for the foreseeable futures as merchandisers look for blending stock. 
  • The odd market out looks to be SRW with its bearish short-term December-March futures spread. 

There’s just something about the wheat complex. I know 99.9% of the commentary in the grain and oilseed industry goes toward King Corn and Sir Soybeans, with the Wizard Wheat always mysterious with its three separate personalities. A couple quick stories: Back when I was merchandising grain in central Kansas, the one market that made me wake up screaming was indeed wheat. And when a popular ag market television show used to have me on as a guest analyst, being a native Kansan always led to the first question being wheat related. Now that that’s out of the way, let’s look where the three markets are: 

Minneapolis (HRS): As I wrote about in my latest Weekly Column on my website, Minneapolis wheat is one of the Top-5 grain and oilseed markets investors are buying into based on its inverted futures spreads. The most recent CFTC Commitments of Traders report (legacy, futures only) showed noncommercial interests increasing their net-long futures position to 24,528 contracts (the week ending Tuesday, October 12), a new record large net-long futures position. The combination of continued noncommercial buying and an inverted forward curve make it spring wheat a Type 9 market (of 9), the most bullish type. 

Kansas City (HRW): While not as bullish as Minneapolis, tight high protein HRS supplies should keep support underneath the old-crop HRW market as merchandisers try to buy blending stock. We can see this shaping up in the basis market, where the cmdty National HRW Basis Index (weighted national average) continues to run well above its previous 5-year highs based on weekly closes. Additionally, the cash spread between HRW and SRW should continue to strengthen given the bearishness of SRW wheat fundamentals. Which brings us to…

Chicago (SRW): I don’t care listen to all the noise about “tight world supplies, oh my!” when it comes to wheat. All I need to know is the Dec-March Chicago futures spread remains on the threshold of moving back into bearish calculated full commercial territory beyond 67%. That’s all any of us need to know. And for now, it’s showing no sign of changing any time soon.