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(August 14, 1997) WHEAT: Wheat futures posted losses during the past week sparked by weaker demand along with news that the U.S. crop was again upped by the USDA. The USDA projected ending stocks up 45 million bushels on their recent production release which was sparked by the fact that total U.S. production was upped by 100 million bushels. The increase in production more than offset the projected 50 million bushel rise in exports. The ending stocks of wheat will be the largest since the 1990/91 not to mention that world stocks will be sharply higher than earlier estimate not only because of the U.S. production, but also Chinese production which was estimated up 7 million bushels from the last release. Overall, market internals are moving into a weak state and without any strong export business a significant break in prices could be in the cards for this complex. Technically, December wheat is in a downtrend; the trend would turn back up on a close over $3.86.
FUTURES STRATEGY–Short WZ at $3.70; maintain a protective buy stop close only at $3.85.
OPTIONS STRATEGY–Short WZ $3.80 calls at $.10; maintain a protective buy stop at $.22.
Tony Montini
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