Charts recommend corn and wheat futures might continue to increase due to Russia-Ukraine war, Cramer states

CNBC’s Jim Cramer on Tuesday stated corn and wheat costs might continue to increase due to Russia’s intrusion of Ukraine, leaning on analysis from Carley Garner, senior product market strategist at DeCarley Trading.

“The charts, as interpreted by Carley Garner, suggest that both wheat and corn prices are headed higher here. Maybe much higher. And that is the last thing we want to see, but we might have to get used to it,” the “Mad Money” host stated.

Cramer stated that Ukraine and Russia represent a 3rd for the world’s wheat production, and while this year’s crop was planted prior to war broke out in between the 2 nations, collecting and delivering might be an obstacle due to high energy expenses and security issues.

Wheat futures

Current costs are the greatest they have actually been because 2008, when a variety of aspects consisting of high oil costs and uncommonly dry weather condition in the United States led wheat to jump to $13 a bushel from the $3 to $6 it hovered around for years prior, Cramer stated.

Garner thinks this dive was “even faster and more disorderly,” Cramer stated. Additionally, since future exchanges have cost limitations on just how much a product can relocate a session, wheat can be “locked limit-up,” which suggests the cost has actually transferred to its limitation in a day, and short-sellers who do not wish to cost the limitation cost are kept in that position till the next day.

This phenomenon occurred throughout the week after the Russia-Ukraine war started, which Garner thinks assisted increase wheat costs to $1360 with little trading.

Here’s a weekly chart of wheat futures and the Commodity Futures Trading Commission’s dedications of traders information. The COT report reveals the net positions of little speculators, big speculators and industrial hedgers.

Here, Garner sees that since of locked limit-up trading sessions, cash supervisors are net long by just 12,000 agreements, Cramer stated. In the past, they might increase to 50,000, according to Garner, which suggests that “if institutional money managers want to bet on wheat here, they’ve still got a ton of dry powder,” Cramer stated.

Garner thinks costs are going to continue to increase, Cramer stated.

Here is the day-to-day chart of the May wheat futures:

After costs peaked on March 8 and went through 6 limit-up relocations, wheat futures decreased greatly, according toGarner But costs still remained above wheat’s 20- day moving average, while the Relative Strength Index, a momentum indication, drew back from overbought area while remaining favorable. This suggests wheat has “got more room to run,” Cramer stated.

“As long as it holds above its floor of support at $10.30 a bushel, which is down roughly 90 cents from here, Garner believes wheat can make another run at its highs over the coming weeks or months,” Cramer stated.

Corn futures

Although Ukraine represent 4% of the international output of corn, “no trader wants to sell corn when the wheat board is lighting up,” Cramer stated. He included that corn had the ability to rally since corn-based ethanol is presently more affordable than oil, which has actually risen in cost in current weeks.

Here is the month-to-month chart of the May corn futures:

Garner thinks the corn rally might end quickly however still be compelling, stated Cramer, including that if corn futures exceed the cost ceiling of resistance around $7.70, it might approach record levels of $8.50

“She doesn’t expect corn to burst through that level, but if it somehow manages to keep roaring, then she doesn’t see any more resistance until $10.50. That would be a new record. If corn gets to that level, it means we’re dealing with an insane level of inflation,” Cramer stated.

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