Wheat Rallies on Ukraine Conflict Fears

Today’s Spotlight Market
The Winter Wheat crop has run into some difficulty due to dry weather, especially in the Southern Plains.? The western portions of Kansas and Oklahoma, along with Northern Texas have been mired in a prolonged drought, with many counties seeing little to no precipitation for several months. Weekly crop condition ratings continue to fall, with only 34% of the crop rated good to excellent as of April 13th. A whopping 32% of the crop is now rated poor to very poor, compared to only 8% of the crop prior to winter dormancy. ?

 

Fundamentals
U.S.? Wheat futures posted strong gains to start the week, as many traders fear that the political turmoil that has arisen in Ukraine will begin to affect Wheat sales from this leading grain exporting nation. Over the weekend, pro-Russian protestors clashed with Ukrainian troops in parts of Eastern Ukraine, sparking fears of further intervention by Russia into the nation?s affairs. Ukrainian grain producers are feeling the effects of this rising political tension, as a weakening currency and difficulty in obtaining credit is proving problematic in obtaining much needed supplies to begin this season?s plantings. While grain sales from the Black Sea region are continuing apace, analysts fear that grain sales may be disrupted in the future should Russian intervention in the nation?s affairs escalate. Grain traders are beginning to believe that the U.S. Wheat exports could increase in the coming months should sales from the Black Sea region be curtailed. However, before one becomes too bullish on U.S. Wheat prices, we should note that global wheat production is expected to increase this coming season, despite potential production concerns from Ukraine. Increased Wheat production is expected out of Europe, Canada, and India for the 2014-15 season which would provide some serious competition for the U.S. in the global grain export market.? ?

 

Technical Notes? -? View Today’s Chart
Looking at the daily chart for new-crop July K.C. Wheat futures, we notice prices attempting to break out to the upside after a nearly 3-week price correction of the current uptrend which begin back in early February of this year. The recent price correction was a near-perfect 38.2% Fibonacci retracement of this uptrend from the February low to the recent highs made in late March.? After briefly tumbling below 50, the 14-day RSI has turned positive, with a current reading of 55.68. Resistance is found at the 20-day moving average, currently near the 759.25 price level, with support found at the recent low of 723.25.

WednesdayAPR16

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