Human Rights Watch (HRW) Possibly Follows similar trajectory as World Trade Index (WTI)
Fresh Takedown:
A shocking dip five years ago pushed the WTI crude oil spot-month contract as low as ($-40.32), shattering the belief that commodity markets never dip below zero. Now, the ominous structure of HRW wheat is making heads turn, with some wondering if it may be the next market to flirt with the big zero as the 2025 harvest nears.
My weekly analysis once more focused on HRW wheat, a market I've dived deep into over the past few months. For me, HRW holds special significance, be it thanks to my childhood spent on a wheat farm in Kansas or the reputation I've earned as an ever-pessimistic analyst. Whatever the reason, the overwhelming bearish sentiment in HRW piques my interest.
Let's break it down structurally. In every commodity market, there are two key players: commercials and noncommercial traders, the latter being funds, speculators, and the like. The latest CFTC Commitments of Traders report showed noncommercial traders had a massive net-short futures position of approximately 43,770 contracts as of April 22, a 4,481 contract increase from the previous week. This shift included a reduction in long futures by 1,470 contracts and an increase in short futures of 3,011 contracts. Two standout points:
- This weekly change appears rather bearish, especially considering it was driven by new selling interest.
- The noncommercial net-short futures position reached an record high.
While the record large noncommercial net-short futures position in HRW wheat presented an opportunity for short-covering, the July issue actually closed 27.25 cents lower during the past week, suggesting the noncommercial short futures position may have grown even larger. Why? Perhaps the continued domination of algorithms, commonly known as Watson.
The awesomely bearish HRW wheat market has been facing immense pressure from Watson, leading some to wonder just how deep this market can fall. Looking back, we remember how the spot-month WTI crude oil contract defied conventional wisdom by dipping below zero in April 2020. While a replay of that catastrophic event for HRW seems rather far-fetched, it doesn't mean it's impossible.
One bushel of wheat left over is too many, according to the "Wheat Reality." With the National HRW Wheat Index ($CRWI) calculated on April 22 at $4.5225, it's clear that the US will have more than one bushel of HRW left over by the time the 2025 harvest commences. So, let's wait and see how this unfolds.
For those of you who may be too young to recall the glory days of AM radio, that's where the "crooners" used to broadcast their tunes before the advent of digital platforms.
In the world of economics, the Law of Supply and Demand tells us that market prices are the intersections of the supply and demand curves.
- The HRW wheat market, with its ominous structure, has some speculating if it could be the next commodity market to dip below zero by the 2025 harvest, much like WTI crude oil did back in April 2020.
- Just as sports teams have their dedicated fans, the HRW wheat market has an ever-pessimistic analyst who spent his childhood on a wheat farm in Kansas and finds the recent overwhelming bearish sentiment particularly intriguing.
- In the HRW wheat market, the average consumer might find it surprising to know that in April 2020, the spot-month WTI crude oil contract defied conventional wisdom by dipping below zero, a trend that some are now wondering if it could repeat in the future.
