Today’s Spotlight Market
Globally, the Wheat market is a mixed bag with favorable growing condition in Australia this season causing traders to raise their production forecasts. While in France, Wheat exports fell to 10-year lows as disappointing production totals and quality concerns force normal importers of French Wheat such as Algeria to search elsewhere for their needs. While Russian Wheat production is expected to be at a record high of 72 million metric tons this season, quality concerns and global competition may keep exports below earlier estimates.
Fundamentals
Wheat futures have largely been ignored by grain traders the past few months as slumping prices and low volatility levels induced traders to focus their attention on Corn and Soybeans. However, with prices for the lead month futures near 10-year lows, one has to ponder what catalysts will finally awake this sleepy market. Low Wheat prices may discourage producers from planting Winter Wheat this coming season, especially in more marginal growing areas where production costs would exceed current market prices. U.S. Winter Wheat plantings were already at historically low levels in 2016 at 36.54 million acres and some analysts expect even less acreage will be planted for the 2017 harvest. Traders following the Wheat vs. Corn spread will note that the Wheat price premium to Corn is near the lower end of the price range seen the past 3-years. This could make Wheat potentially attractive for animal feed especially if producers decide to store more Corn instead of selling it at current prices once the harvest begins.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Wheat futures, we notice prices briefly dipping below psychological support at 400.00 before a brief short-covering rally tied to bargain hunting buy sent prices as high as 411.00 before fresh selling pressure emerged. Prices also failed to test the 20-day moving average during the recent short covering rally, so this technical indicator should be closely watched to see if it will continue to deflect any upcoming rally attempts. The 14-day RSI remains weak with a current reading of 36.61. The contract low of 386.75 made back on August 31 is currently seen as strong support for the December contract with near-term resistance found at the September 13 high at 411.00.
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