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OPINION

Snap, crackle, and pop

Snap, crackle, and pop
February 4, 2016
Snap, crackle, and pop

In the UK sales of the breakfast favourite dropped by 2 per cent last year, some blaming it on the fashion to eat 'on-the-go' (think paper coffee cups and patisseries), others pointing the blame at millennials' faddish food faves. The latest unisex choice, bircher muesli, preferably made overnight by celeb chef Jamie Oliver, sprinkled with chia seeds, natural vanilla extract (organic, of course) and splashed liberally with almond or coconut milk (the price of a litre of which is up 50 per cent in two years). Meanwhile, UK dairy farmers are crying into their spilt milk.

So has this affected wholesale markets? We look at the price of their futures contracts, which are most actively traded in Chicago. Kicking off with corn, it's trading at less than half of 2012's record high (843¢ per bushel). Bumping along the bottom at about 365¢ last year, the very recent attempt at a short squeeze failed miserably against the combination of secular resistance at 390¢ and Fibonacci 38 per cent resistance at 395¢. Expect it to hold below here for another three to six months, before another attempt at a rally occurs.

 

  

Rough rice as it's called, specifying the deliverable quality, is trading at almost one-third of 2008's record high at $24.685 per hundredweight. As it did in 2010 and 2015 it has bounced from the $9.500 area after being capped at (unlucky) $13.000, secular resistance since 1988. Therefore over the rest of this year we shall expect a series of slightly scary swings between $9.000 and $13.000. One for the traders out there.

  

  

Despite porridge's popularity over the past five years or more the chart of the price of oats is a sorry one indeed. A late 'peaker' in 2014 at 600¢ per bushel, look at it now after slumping dramatically to this year's low at 160¢. Another one squeezing higher last week - and failing miserably with a shooting star candle at the halfway retracement level from the drop since Christmas. This may prove to be an interim high for the next three months or so, in which case one must prepare for repeated downside testing over the summer.

 

  

Wheat, so essential for our breakfast toast (as well as lunchtime sarnies), is trading at less than one-third of 2008's especially spectacular peak at 1,334¢ per bushel. Currently attempting to base against interim support between 400¢ and 440¢ per bushel (that has held since 2007) last week's spike high is a particularly egregious example of a short squeeze. Over the coming months we would favour a lot of random but cautious swings between 400¢ and about 500¢.

 

 

More importantly perhaps is that all these grains are trading at levels we have seen 10, 20, 30, even 40 years ago - a testament to farmers' efficiency and ingenuity.