It’s raining outside. Again. All the rain has been great news for wheat growers in Victoria. But is now the time to go bearish on wheat, before the ground is even dry?
Yesterday’s Financial Review ran an article detailing how a lack of maintenance and upkeep has reduced the speed and traffic on the rail lines that carry Victorian wheat to market. Is another Queensland-coal-like bottleneck forming in wheat?
And then there’s the question of wheat prices. Our commodity-trading analyst friend Steve Belmont chimed in with this from Chicago yesterday:
“Since 1978, every spike high in wheat above US$4.50 per bushel has reversed, causing prices to retreat below US$4.00 per bushel within 7 to 9 months. Markets anticipate. Wheat is an international crop. It is grown everywhere. High wheat prices increase acreage, which increases supply, which lowers prices. Will the same thing happen this time? We don’t know. There is always the possibility ‘things will be different this time.’ However, every time we hear that phrase we want to run the other way. This is precisely what we want to do now.”
Markets and Money