Milling & Baking News - April 20, 2010 - 34

Roundtable 

fundamentals seemed bearish for both
the current year and for 2010-11, outside markets bear watching.
"My outlook primarily is predicated
on the bearish fundamentals for wheat,"
Mr. Meyers said. "The U.S. dollar has
been weakening in the last couple of
weeks. Crude oil made 18-month highs.
But my expectation is for the dollar to
strengthen during the next few months
and for crude oil to weaken some. I expect crude oil to trade between $75 to $85
during the next couple of months and the
dollar index that is under 81 points now
to go back up to 83 or 84 points."
Mr. Freed saw weaker wheat prices
ahead but cautioned, "It seems the stock
market goes up every day, and as it goes
up, people are getting more confident
the economy is getting better. It pulls
up energy prices. There has been a pull
back in the dollar, which is usually positive to commodities. This may lead to
more money in our marketplace, and we
all know what happened in 2007, when
new money came into markets that we
thought were fundamentally bearish.
"So we have to watch closely. Does
the stock market continue going up,

does the dollar keep going down, does
oil keep going up. All of these are factors in money flow and could put the
wheat market back up over what we
see to be resistance."
Mr. Freed pointed to other uncertainties, including possible new regulations on some of the index traders
in the marketplace to try to limit their
impact, especially on energy prices.
"So we don't know if we'll be playing on a different playing field," Mr.
Freed said. "Whether banks may trade
their proprietary accounts, or whether
or not the index traders will lighten the
load. In Chicago we have a record short
from the traditional funds and a record
long from the index funds. We don't
know which is going to blink first."
Always a factor will be China's
needs, Mr. Freed said. China might
have to import corn because of drought
in the southern part of the country.
"Is China a corn buyer?" Mr. Freed
said. "Will its economy continue to
grow? This might not be directly related to wheat, but if demand pushes
crude oil above $100 a barrel, wheat
prices might not be able to go down."

But as things stand, Mr. Meyers indicated his price forecast for Kansas
City nearby wheat futures was for
an average range from $4.55 to $4.85
a bu with a September futures price
reaching perhaps $4.30 a bu. Chicago
futures, Mr. Meyers said, should be
around those levels, perhaps 5c lower,
and Minneapolis futures should be
around 20c higher than K.C. levels.
Mr. Freed said he expected a
$4.25@5.25 trading range
Mr. Meyers said if prices get back
to recent contract lows, bakers should
finish booking second-quarter needs
but hold off on booking most of their
summer needs until prices go down to
around $4.60 with an eye to the possibility K.C. September wheat might trade
down to $4.30 a bu. He added protein
premiums also should come under
pressure once harvest begins, especially
if hard winter wheat and hard spring
wheat protein advances to more normal
levels after last year's low-protein crops.
Mr. Freed said any further market
weakness should be used to book
flour at least through July. MBN
- Jay Sjerven

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