Wednesday, August 7, 2013

Wheat - fundamentals bullish

Some positive things have appeared most recently in wheat fundamentals. Wheat is a commodity so the most important aspect of investing in it is demand and supply.
Because of increasing demand from China seasonal world demand is forecasted to be bigger than supply. Let's look at the table:

                                                                         source: USDA

Season 2012 / 2013 has set a record - 25.013 thousand metric tons of wheat were on demand side. Then, the forecasts for season 2013 / 2014 were quite opposite - supply was to be bigger than demand. But in July this forecast has changed; due to bigger demand from China, current forecast is again for demand side. What's more - the ending stocks of wheat are forecasted to stand at 90 days of world daily consumption which is quite a small numer.

Now, fundamentally we have the situation ripe for higher wheat prices. So what about the futures market ? Well, here everybody seems to be very busy in selling wheat.


For example, speculators have one of the biggest short positions in many years.

                                                                     source: Proste Dywagacje

So, generally, this seems to be one of the best opportunities to start betting on wheat prices on long side of the market.

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