The Teucrium Wheat Fund (WEAT) offers traders unleveraged direct publicity to wheat with out the necessity for a futures account. Due to this fact, the choice to speculate on this fund needs to be made after analyzing the wheat market.
The present wheat futures value is above its five-year excessive. On condition that the seasonality now suggests a interval of doubtless decline within the wheat value, in my view and on this context, wheat is a bit costly.
Wheat is now comparatively dearer than corn and should drop by 20% to achieve an affordable degree:
Based on the USDA, as of the third week of August, the gathered quantity of exported wheat along with the excellent gross sales within the U.S. amounted to 11.11 million tons. That is the best determine for the present time of the yr, which the previous 5 years have seen. However there isn’t a vital deviation from the five-year vary:
Provide And Demand
The latest USDA forecast assumes a surplus on the planet wheat market (excluding China) of 9.89 million tons. However two months in the past, this determine was over 14 million tons. This creates some concern in regards to the stability of the market stability within the present yr. However once more, nothing vital has but been noticed.
Within the corn market, as a commodity market, the value is shaped on the idea of the stability between provide and demand. One of many key markers of this stability is the stock-to-use ratio. Due to this fact, in the long term, there’s the connection between the values of the stock-to-use ratio and the common value of the corn futures.
Based on the newest USDA knowledge, the stock-to-use ratio for the worldwide wheat market will exceed 42% within the present season. This can be a multi-year file:
Funds’ present internet place on wheat (CBOT) is near impartial. Their newest actions are additionally not particular.
I see no cause why a robust motion within the value of wheat might now be anticipated. In such situations, in my view, the WEAT ETF will display a sideways dynamic within the close to time period.
Disclosure: I/now we have no positions in any shares talked about, and no plans to provoke any positions inside the subsequent 72 hours. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from Searching for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.