Weather Concerns Supporting Wheat Prices
? ? Fundamentals
One of the few commodity markets that traded higher after the U.S Presidential election results were announced was the Grain Complex, particularly the Wheat market where a weaker U.S. Dollar, tighter global supplies and drought conditions overtook the negative tone for commodities. Global Wheat ending stocks are anticipated to have decreased by 3 to 5 million metric tons since October’s estimate when the USDA Supply/Demand Report is released this morning. Lower production estimates out of South America and Australia are expected to be behind the lower inventories estimate, though there are also some concerns over China’s official production totals. Wheat prices in Europe have soared, which is typically viewed as supportive for U.S. Wheat exports, as it may bring additional business back to the U.S. Drought conditions in the central and southern plains have triggered fears that the recently planted new-crop will get off to a poor start as we move into dormancy this winter. Any lack of snow cover exposes the crop to potential winter kill, especially if we are experiencing below normal temperatures this season. Large and small speculators have been on opposite sides of the Wheat market, with large non-commercial traders net-long Wheat futures and small speculators and commercial traders holding net-short positions. Should we see a technical break-out to the upside, we could see a slew of buy stops being triggered as small speculators run to the exits and large trend following traders add to existing long positions.
?? Technical Notes
Looking at the daily chart for March Wheat, we notice prices trying to break out to the upside, out of the sideways movement seen since July. Prices are now moving above the 20-day moving average and momentum is turning up, with a current reading of 62.36. 943.25 is seen as the next resistance level for March Wheat, with support found at 867.75.
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