Wheat Back to Support Level

Wheat prices are nearly back to the level where they have found support previously. It is becoming a good buy again! Also weighing on wheat is the possibility of changes to the wheat contracts.

From Bryce Knorr at Farm Futures:

There are a couple potential "quick fixes" to the problem of lack of convergence between Chicago futures and the cash market for soft red winter wheat. But a panel studying the issue for the Commodity Futures Trading Commission Thursday backed off from recommending any drastic changes.

Instead, the group appears ready to put together recommendations for more incremental modifications to the beleaguered contract.

The Subcommittee on Convergence in Agricultural Commodity Markets, created by the CFTC's Agricultural Advisory Committee, appeared in agreement only to support a proposal for what amount to variable storage charges on wheat held for delivery. The panel, which held a two-hour teleconference Thursday afternoon after the market closed, also asked the CFTC staff to prepare more information on a cash-settled wheat contract and a plan to discount wheat delivery certificates as they age.

The subcommittee dodged any action on the 800-pound gorilla in the debate – limiting index fund holdings. That issue will be addressed in three other CFTC hearings over the next two weeks. While much of those hearings will focus on energy, action to limit a hedge exemption index funds use as a loophole could also apply to the grain market, having serious consequences for prices.

Wheat prices broke sharply on Wednesday after Thursday's meeting was announced, with traders fearing drastic action could lead to liquidation.

There is much concern about buying wheat in the face of a potentially onerous Washington regulatory burden. They nearly always have destructive side effects that push prices higher and create shortages. It is suppressing prices until this whole thing shakes out! This will eventually lead to higher prices because farmers will cut production if prices remain below production levels.