Legacy Market News 11-10-2017

Weekly Market Highlights

  • Hard red spring wheat futures prices traded sharply higher this week. Basis premiums were mostly firm for spring wheat.
  • Hard red winter wheat futures prices traded higher this week, but price moves for the winter wheat basis screamed higher.

    A wrap up of the fall crop harvest is expected to hopefully restore some calm to the winter wheat basis market at some point.

  • The USDA is issuing world production reports today; surprises large enough to change wheat market direction are not expected.
  • Record world wheat supplies continue to limit how high wheat futures prices in the U.S. can move. Farmers weighing the cost of producing wheat with the price they are likely to receive for their crop are deciding to move away from planting wheat again this fall. Long term, these decisions could limit supply and result in higher prices.
  • For now, basis premiums need to do the job of convincing producers and elevators to part with what wheat is needed by millers, whatever it takes.

Flour Facts

While even the most experienced traders are, at times, befuddled by the apparent chaos and volatility amid the noise and confusion, the workings of the grain futures markets are actually rather orderly, highly regulated and very important to the efficient function of the grain and milling industry.

Futures satisfy three very critical economic needs;
1. Pricedeterminationinafairandopenmarketplacewhereallparticipantshaveequalaccess.
2. Allocationofgrainsupplyovertheentirecropyear.
3. Risk avoidance for mills and other participants through “hedge” positions that “insure” against decreases in the value of stored grain.

In the absence of futures markets, grain and flour prices would almost certainly be determined less honestly and efficiently.

Supply and prices would be less consistent since there would be no way to encourage sellers to defer grain sales to “future” positions during times of surplus, and, grain traders, millers and buyers of flour would shoulder huge risk in owning wheat and flour.

Legacy Market 11-10-2017

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