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Wheat Woes
Today’s Spotlight Market?? -? Wheat prices were a bit firmer yesterday, despite indications that global production of the grain is expected to rise.? According to the International Grains Council (IGC), world Wheat production is expected to rise 7.9% this season.? The IGC expects larger crops in Canada, China, and Australia.? Emerging market currencies have taken a hit versus the US Dollar, as some traders have begun to have growth concerns for emerging economies.? The increase in interest rates in Turkey and Brazil suggests that emerging market countries may be entering into a tightening phase.
Fundamentals?? -? The 2013-14 crop year is forecast to yield 707 million metric tons of Wheat globally.? However, the IGC expects 2014-15 production to fall back to 697 million metric tons, which is actually down from last month?s estimate of 699 million metric tons.? Bulls were hopeful that attractive prices and demand for meats would drive some demand for feed, which has not yet materialized.? In fact, many believe that the USDA?s forecast of global feed usage is grossly overestimated.? Current Corn prices are at low levels, which give feedlots little, if any, incentive to switch to Wheat-based feed.? It is somewhat surprising that export demand for US Wheat has been soft, as US prices are among the cheapest in the world. ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Wheat (WH14) contract continuing to trend lower.? The next support levels come in near monthly chart support at 500 and 450.? While the chart shows a continuation of the downtrend in the Wheat market, the RSI indicator has been rising since late December.? This divergence suggests that a reversal may, potentially, be on the horizon.? Traders may look to the chart to offer signs of a reversal.
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