This summer, the Wheat market has been about as merry as a mortician. To wit: On September 10, prices in the grain plunged to their lowest level in two years.
As for why -- well, the mainstream experts have their fair share of ideas as to what's behind the grain's powerful descent; in the interest of time, I've narrowed their explanations down to these three:
- An August 12 US Department of Agriculture (USDA) report revealing global wheat production in the marketing year ending on May 31 yielded the second largest harvest on record. On this, one Bloomberg report wrote: "Prices declined on speculation that increased production will boost supplies."
- An early September weather report; it showed "beneficial rainfall in Australia, the world's fourth-largest wheat exporter."
- A September 8 news story uncovering the biggest Australian wheat crop in four years; here, a same-day news source observes: "The momentum for prices unfortunately is still largely down. A big Australian crop can only be bearish for prices." (AP)
Why "unfortunately"? There's nothing unfortunate about a persistent drop in wheat prices, so long as you catch the reversal BEFORE the tide has turned in earnest.
Obviously, the mainstream experts failed on that front, but that doesn't mean someone else didn't see the grain's nosedive coming from miles away; Namely, Elliott Wave International's chief commodity analyst Jeffrey Kennedy.
In the big picture, the recent downtrend in wheat got started in mid-June, at an eight-month peak in prices. Days later, Jeffrey Kennedy dedicated the "Featured" market segment of the June 2009 Monthly Futures Junctures to the grain. Under his scope of Elliott wave analysis, Jeffrey saw the grain's winning streak coming to a violent end. There, he presented the following close-up and wrote:
"The Party's Over In Grains. Wheat has finished a three-wave corrective advance at the recent June peak. Since three wave moves are considered to be corrections, according to the Wave Principle, we can look for wheat to more than completely retrace the December 2008 advance that began at 497."
Now, Jeffrey turns to the short side of wheat and presents objective insight into the near-term changes ahead. The September 9 Daily Futures Junctures has the full story, in addition to compelling analysis of the next potential move in Orange Juice.