No Love For Wheat As Prices Continue To Retreat
Today’s Spotlight Market
On January 12th, the USDA released its estimate for U.S. Winter Wheat seeding for the 2014-15 season. Approximately 40.5 million acres were planted according to the USDA, which is down 5% from 2014. Hard Red Winter Wheat accounted for 29.5 million acres, which is down 3% from 2014. Soft Red Winter Wheat totaled 7.5 million acres, which is down 12% from last year?s totals.
Fundamentals
Wheat futures have been in a price slump since 2012, as prices have moved steadily lower and are starting to approach more ?historic? price ranges. Prior to 2007, Wheat prices generally have traded in a price range between 250.00 and 500.00. However, the commodity-wide bull market of 2008 propelled many commodities, including Wheat, to historic highs. Now to start 2015, we are seeing a general commodity-wide bearish trend developing, with a slew of reasons being given including slowing global growth and a strong U.S. Dollar. The rising value of the greenback is hurting U.S. Wheat exports, as it makes U.S. purchases more expensive for non-dollar users. However for Wheat bulls, there may be some light at the end of the bearish tunnel.
First, the International Grains Council is expecting global Wheat production to decline by 16.0 million metric tons in 2015, as it expects lower production from both the U.S. and Russia this coming season. Global Wheat consumption is expected to remain steady at 708 million tons, but the expected decrease in production could see the market possibly move towards a deficit by year end. The biggest wildcards in 2015 for Wheat prices will be how both Russia and Ukraine, who are both major grain producers and exporters, are able to supply the export market given the continued military conflict by these Black Sea neighbors.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for new-crop July Wheat, we notice prices continuing to drift lower after peaking above 660.00 back in December.? Prices remain well below both the 20- and 200-day moving averages, and the 14-day RSI has entered oversold territory, with a current reading of 22.88. Old-crop/new-crop spreads continue to favor the bears, as July is trading at a 10-cent premium to the March futures, mainly tied to poor U.S. old-crop exports.? Support is found at the September 2015 lows near the 496.00 price level, with resistance found at the January 21st high of 551.25.?
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