Exports and Weather Concerns Bringing Some Support to Wheat Futures
???? Fundamentals
After trending lower for most of 2013, Wheat futures prices have begun to stabilize, as weather concerns for the emerging crop and stronger export demand have taken some of the bearish bias out of the market. Below freezing temperatures in the Western Plains have triggered fears that the recently emerged crop has suffered some damage. However, it is still too early to tell the extent of any damage, as the effects of cold temperatures will depend on what stage of development the crop is in.
The Great Plains region has been in the midst of a severe drought during the past several months, although recent precipitation and snow cover should benefit the Hard Red Winter (HRW) Wheat crop grown in this region. Soft Red Winter (SRW) Wheat futures, meanwhile, are being supported by strong export sales, with China among the leading buyers of SRW this month.
Hard Red Spring (HRS) Wheat prices are finding some support from the potential of severe flooding in the Red River Valley. North Dakota is the leading HRS producing state, accounting for nearly half of U.S. production of this high protein variety. The upper Midwest still has significant snow cover,with recent storms producing nearly an additional foot of snow in some areas. A late spring thaw will keep fields too wet to plant, which could
???? Technical Notes
Looking at the daily chart for July Soft Red Winter Wheat, we notice what appears to be a diamond-bottom formation. This rather rare formation is normally associated with pending market tops, but can also be useful in identifying potential bottoms in a downward trend.
Prices are trading near the 20-day moving average (MA), but are still well below the longer-term 200-day MA that is a popular barometer to determine if the longer-term trend of a market is favoring bulls or bears. The 14-day RSI is neutral, with a current reading of 50.97. Support for July Wheat is seen at the recent low of 669.00, with resistance found at the March 28th high of 740.50.
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