USDA Report Sinks In

Wheat prices have been moving sideways on the charts for the last few months. The bearish inventory fundamentals have long been in evidence. However, over that time period the USD has strengthened substantially, undermining the price stability at these levels. Yesterday's USDA report has made the inventory backdrop appear even worse than assumed, since the main new area of building stockpiles is China. Yes, that same China that can't get enough oil or copper or palladium apparently grows more wheat than it can eat. As does India. Uh oh.

The nearby spreads on the CBOT continue to push toward the VSR maximums, but our July11/Dec11 spreads did not reflect any of this oversupply news. Nor did the CBOT fall a lot more than MGE or KC--both disappointing developments.

Just for laughs, if you want to see Nobel Prize-winner Paul Krugman get it all wrong, here is a link to his "Grains Gone Wild" column from 2 years ago. They still eat meat in China, we use more ethanol than ever, and global warming continues, but grains have not gone wild...grain prices are much, much lower than 2 years ago.