Grains End Mixed With a Lack of News: When Does the Grain Market Become a Geopolitical or Inflation Buy?

Grains end mixed Wednesday with the markets lacking news and direction.

Kevin Duling, KD Investors, says wheat saw some technical selling pressure after hitting chart resistance and it was a bit surprising considering the weaker dollar.  

Duling says wheat action has been disappointing this week with the drop in crop ratings in key producing areas like Kansas and production issues in Russia that have resulted in some downgrades in crop estimates there. 

"I was preparing for a plus 25 cent week based on the Russian forecast and some of the Western and South Plains forecasts.  I thought okay, this should be a strong week and then here we are down 12-13 cents today in Chicago, 15-16 in Kansas City wheat."

Soybeans and products saw corrective buying, bouncing off chart support at May beans hit one-month lows in the overnight session. "It is possible the market will go back and test the contract low in soybeans," he says.  

Corn was slightly lower caught between higher beans and lower wheat.  However, corn is still in a narrow sideways trading range. 

Grains generally lack buying interest by the funds but do they become an inflationary and geopolitical buy at some point? 

Duling thinks so.  "I think we're going to be in a very rocky next seven to eight months. It would not surprise me to see at some point a lot of outside money come off the sidelines and try to buy real products.  If they're chasing gold and silver now, they're going to look at grains as dirt cheap."  

However, there have been some head scratchers happening in the market such as traders buying gold and silver but also buying the dollar.  He says these are odd moves but may be attributed to the geopolitical and inflationary climate the market finds itself in.  

Duling says, "We're just not seeing normal trade right now.  Last fall when Israel got attacked it looked like the Middle East was going to blow up, so I threw on some cheap energy hedges just to protect the upside.  However, crude oil dropped $10 and it's down today even though it looks like they're going to have a counterattack."

Source: AGWEB