European Showers Bring a Wheat Rally
Today’s Spotlight Market
Wheat prices have been driven higher by weather conditions in western Europe, but how high can the grain go? Many believe the upside potential for the market could be severely limited by the oversupply in the US and other countries. The US is bursting at the seams with Wheat supply. The US Dollar Index has fallen over recent sessions, which has helped commodity prices.
Fundamentals
Heavy rains across western Europe have placed crops at severe risk in some places. France has seen flood conditions in the northern plains, which is home to some of the country?s largest grain belts. Some traders are concerned that France?s yields and crop quality may be diminished. The elevated moisture also exposes crops to possible dampness-related plant infections in some areas. In the US, farmers face a different challenge, as grain surpluses have created storage issues for many farmers. Last year?s excess Wheat, Corn and Soybeans are eating up silo space, making it difficult for farmers to find a home for grain. In Kansas, for example, inventory levels were 29% larger than last year, even before the harvest. Leftover grain is using up 52% of the state?s storage capacity, compared with 41% a year earlier. It is important to note Kansas is the largest grain producing state in the US.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the July Wheat contract trading back through the 500 level. Prices are coming up to near-term resistance at the 512.25 level, which could be a near-term sticking point for Wheat. If prices are able to advance beyond this level, prices could test more stout resistance around the 526.25 level. Failure to do so, however, could result in more range-bound trading.
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