Bears In Retreat From Oversold Wheat
Today’s Spotlight Market
Our ?neighbor to the north? Canada is expecting to see its grain stocks fall this coming season as Durum Wheat supplies are expected to decline due to lower plantings. Agriculture and Agri-Food Canada (AAFC) is reducing its estimates for Durum Wheat inventories by 200,000 tons for the 2015-16 marketing season to 800,000 tons. The reduction is based on expectations for reduced acreage this coming season, while Durum export estimates remained unchanged at 4.9 million tons. Overall Canadian grain inventories are expected to decline to 8.73 million tons which if accurate would be a decline of over 20% from the previous season.
Fundamentals
?The rain in Spain is missing the Great Plains!” While not quite the lyrics from the famous Lerner & Loewe tune that was used in the musical My Fair Lady, but certainly more apropos to the situation facing the Hard Red Winter Wheat crop in the U.S. as early spring rain totals have been disappointing. Traders are beginning to fret that the emerging Wheat crop is becoming stressed due to a combination of volatile swings in temperatures, as well as growing drought conditions, especially in the western parts of Kansas and Oklahoma. The Climate Prediction Center has just published its seasonal drought outlook for the next 3 months which show that drought conditions are expected to persist for most of the Southern Plains regions, especially in the Panhandle area of Oklahoma and Texas.
As we head into April, traders will be keeping their eyes on the weather forecasts with the 6 to 10 day outlook calling for above to well above temperatures and below average precipitation for the central and west central parts of the U.S. This continuation of warm and dry conditions has started to affect the quality of the emerging Wheat crop with Kansas seeing the percentage of the Wheat crop rated poor to very poor rise by 4% to 17% last week. With U.S. Wheat exports running behind USDA forecasts, it appears that Mother Nature may be the key determinant as to the direction of Wheat prices this spring.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for May K.C. Wheat, we notice the minor uptrend that has formed following a move to new contract lows back in early March. Although prices are now trading above the 20-day moving average, we should note that Tuesday?s sell-off has raised the odds that a double top is forming as Monday?s high of 579.25 failed to test chart resistance at the February 17 high of 583.25. The 14-day RSI, which has been trending higher of late, has moved to a more neutral stance with a current reading of 55.39. Wheat bulls will counter that what we are seeing on the daily chart is actually a ?V? bottom, but this pattern will not be confirmed unless we see a close above 587.75.??
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