Strong Dollar Hurts U.S. Wheat Sales
Today’s Spotlight Market
A sharp decline in grain prices this year may cause U.S. producers to cut overall planted acreage for major cash crops. At the Agricultural Outlook Forum, the USDA has projected that planted acreage will fall by 3.3 million acres to 254.6 million acres. If accurate, it would be the lowest total planted acreage in 4 years. Traders will get the first estimate of planted acreage based on producer surveys when the USDA releases its Prospected Plantings report on March 31.
Fundamentals
2015 is shaping up as a difficult year for U.S Wheat producers as the continued strength in the value of the U.S. Dollar (USD) has significantly hurt Wheat exports. Since the start of the 2014-15 marketing year on June 1, U.S. Wheat export sales have totaled about 20.7 million tons. This is down nearly 25% from the same period last season.
One of our biggest U.S. Wheat buyers in the past, Egypt, has moved elsewhere for its Wheat purchases of late, with only just over 96,000 tons sold so far this season, which is nearly 57% below last year?s totals. In fact, Egypt recently cancelled a U.S. Wheat tender, despite receiving a rather large line of credit to purchase U.S. Wheat. Instead, it appears that they will turn towards Europe for their most recent Wheat purchase as the overall cost per ton is much less than that from the U.S.
Going forward, with the U.S. on the verge of seeing an interest rate hike for the first time since 2006, and Europe seemingly stuck in a slow to no growth economic environment, continued strength in the USD shows few signs of slowing, which may contribute to more international Wheat buyers turning to Europe and away from the U.S. and Russia for their imports. ?
Technical Notes? – View Today’s Chart
Looking at the daily chart for March Wheat, we notice prices closing sharply lower on Friday closing near the lows for the week. It appears that selling pressure accelerated once the market moved below the 20-day moving average. The 14-day RSI was only able to reach a neutral 50 reading on the recent rally, before ending the week at a rather weak 38.40. Support is seen at the recent low of 492.25, with resistance seen at the 2/17 high of 548.00.
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