CNBC’s Jim Cramer on Tuesday mentioned corn and wheat costs might proceed to rise resulting from Russia’s invasion of Ukraine, leaning on evaluation from Carley Garner, senior commodity market strategist at DeCarley Buying and selling.
“The charts, as interpreted by Carley Garner, recommend that each wheat and corn costs are headed increased right here. Possibly a lot increased. And that’s the very last thing we wish to see, however we’d need to get used to it,” the “Mad Money” host mentioned.
Cramer mentioned that Ukraine and Russia account for a 3rd for the world’s wheat manufacturing, and whereas this 12 months’s crop was planted earlier than conflict broke out between the 2 international locations, harvesting and transport might be a problem resulting from excessive vitality prices and security issues.
Present costs are the best they have been since 2008, when a slew of things together with excessive oil costs and unusually dry climate in the USA led wheat to leap to $13 a bushel from the $3 to $6 it hovered round for many years prior, Cramer mentioned.
Garner believes this soar was “even sooner and extra disorderly,” Cramer mentioned. Moreover, as a result of future exchanges have value limits on how a lot a commodity can transfer in a session, wheat may be “locked limit-up,” which implies the worth has moved to its restrict in a day, and short-sellers who do not wish to promote on the restrict value are held in that place till the following day.
This phenomenon occurred in the course of the week after the Russia-Ukraine conflict started, which Garner believes helped drive up wheat costs to $13.60 with little buying and selling.
Here is a weekly chart of wheat futures and the Commodity Futures Buying and selling Fee’s commitments of merchants information. The COT report reveals the online positions of small speculators, massive speculators and industrial hedgers.
Right here, Garner sees that due to locked limit-up buying and selling periods, cash managers are internet lengthy by solely 12,000 contracts, Cramer mentioned. Up to now, they may go as much as 50,000, in response to Garner, which signifies that “if institutional cash managers wish to guess on wheat right here, they’ve nonetheless obtained a ton of dry powder,” Cramer mentioned.
Garner believes costs are going to proceed to extend, Cramer mentioned.
Right here is the day by day chart of the Could wheat futures:
After costs peaked on March 8 and underwent six limit-up strikes, wheat futures declined sharply, in response to Garner. However costs nonetheless stayed above wheat’s 20-day shifting common, whereas the Relative Energy Index, a momentum indicator, pulled again from overbought territory whereas staying optimistic. This implies wheat has “obtained extra room to run,” Cramer mentioned.
“So long as it holds above its flooring of assist at $10.30 a bushel, which is down roughly 90 cents from right here, Garner believes wheat could make one other run at its highs over the approaching weeks or months,” Cramer mentioned.
Though Ukraine accounts for 4% of the worldwide output of corn, “no dealer needs to promote corn when the wheat board is lighting up,” Cramer mentioned. He added that corn was capable of rally as a result of corn-based ethanol is presently cheaper than oil, which has surged in value in current weeks.
Right here is the month-to-month chart of the Could corn futures:
Garner believes the corn rally might finish quickly however nonetheless be hard-hitting, mentioned Cramer, including that if corn futures surpass the worth ceiling of resistance round $7.70, it might strategy report ranges of $8.50.
“She would not count on corn to burst by that stage, but when it someway manages to maintain roaring, then she would not see any extra resistance till $10.50. That may be a brand new report. If corn will get to that stage, it means we’re coping with an insane stage of inflation,” Cramer mentioned.
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