Concerns about drought stress in the U.S. wheat growing area may have bumped the slumping wheat market higher for a day or two, but farmers deciding when to sell both old and new crop need to look at the bigger picture, including the overall economic slowdown, global crop production, and higher interest rates, says the markets specialist with RFD-TV.
“There hasn’t been any good bullish story to run a buyer in to try to take these markets higher. And it’s not going to be demand because we are arguably overpriced on some things,” says Scott Shellady, aka “The Cow Guy” and host of Cow Guy Close on RFD-TV.
Even if weather concerns in the U.S. expand, he doesn’t see potential for a strong, sustained weather rally.
“I think that there’s gonna be a lot of selling from folks that missed it on the way down, so it’s not going to be that automatic snapback and if we do, it’s only gonna be there for a couple of days. You better have your orders in and resting. I don’t want to be too doom and gloom-ish. I’m just trying to be as a matter of fact,” says Shellady, speaking with RealAg’s Shaun Haney.
Funds are also “sitting fat and happy” on their short positions, he says. “It’s going to take a little bit more than just a dry 10 days in the Midwest to scare them out of their shorts. And so I think it’s gonna be a tough row to hoe. I mean, we could get a genuine weather rally, I suppose, but it’s just way too early to be pinning my hopes on that. I can’t pin my hopes on demand right now because arguably overpriced.”
Shellady is concerned producers may have received the wrong message from the poor results that were reported on the annual wheat tour through Kansas and surrounding states earlier this month.
“I got really angry at that wheat tour, because what is that data worth? What are you trying to do, to get farmers to hold on to what they got and have it go down more? You need to say ‘here is what we see in a very stressed area of the States, but I want you to take consideration of where the dollar is trading, what interest rates are doing, what larger crops in other countries are doing.’ You need to know that because just taking the data from the wheat tour, I would say it’s worth zero because it only hurt guys. They held onto bad positions,” he argues. “You can’t just take that data in a silo. You need to have everything else on the table, and that needs to be one of 10 things.”
Check out the conversation below with The Cow Guy for more of his thoughts on where grain and broader markets are at, and why he’s sharing a bearish outlook heading into summer:
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