Charts suggest corn and wheat futures could continue to rise due to Russia-Ukraine war, Cramer says – What We Know!

CNBC’s Jim Cramer on Tuesday mentioned corn and wheat costs may proceed to rise as a consequence of 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, counsel that each wheat and corn costs are headed increased right here. Possibly a lot increased. And that’s the final thing we need to see, however we’d need to get used to it,” the “Mad Cash” host mentioned.

Cramer mentioned that Ukraine and Russia account for a 3rd for the world’s wheat manufacturing, and whereas this yr’s crop was planted earlier than battle broke out between the 2 nations, harvesting and transport might be a problem as a consequence of excessive vitality prices and security considerations.

Wheat futures 

Present costs are the very best they’ve 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 bounce was “even quicker 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 means the worth has moved to its restrict in a day, and short-sellers who don’t need to promote on the restrict value are held in that place till the following day.

This phenomenon occurred through the week after the Russia-Ukraine battle started, which Garner believes helped drive up wheat costs to $13.60 with little buying and selling.

Right here’s a weekly chart of wheat futures and the Commodity Futures Buying and selling Fee’s commitments of merchants knowledge. The COT report exhibits the web positions of small speculators, giant speculators and business hedgers.

Right here, Garner sees that due to locked limit-up buying and selling classes, cash managers are internet lengthy by solely 12,000 contracts, Cramer mentioned. Previously, they may go as much as 50,000, based on Garner, which means that “if institutional cash managers need to wager on wheat right here, they’ve nonetheless received 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, based on Garner. However costs nonetheless stayed above wheat’s 20-day transferring common, whereas the Relative Power Index, a momentum indicator, pulled again from overbought territory whereas staying optimistic. This implies wheat has “received 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.

Corn futures

Though Ukraine accounts for 4% of the worldwide output of corn, “no dealer desires 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 at the moment 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 may finish quickly however nonetheless be hard-hitting, mentioned Cramer, including that if corn futures surpass the worth ceiling of resistance round $7.70, it may method report ranges of $8.50.

“She doesn’t count on corn to burst via that stage, but when it in some way manages to maintain roaring, then she doesn’t 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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