Can Wheat Prices Spring To Life?
Today’s Spotlight Market
Wheat prices may receive a modest boost later this season from what is expected to be a second consecutive down year for Brazilian Wheat production. It appears that producers may favor planting additional acres for Corn next season given current favorable profit margins. While Brazil is an overall net-importer of Wheat, any additional shortfall in domestic production will likely force Brazil to purchase additional Wheat from its neighbor Argentina, and possibly the U.S. if prices remain attractive. Traders should keep an eye on the value of the Brazilian real which has become rather volatile of late, as the market has started to recover from 12-year lows vs. the U.S. Dollar.?? ?
Fundamentals
Wheat futures prices have been in the doldrums for the past 6 months, as large global supplies and weak demand for U.S. Wheat has kept the market on a downward path. However, as spring approaches and the Wheat crop emerges from its winter slumber, market participants may begin to fixate on Mother Nature and her potential wrath on the emerging crop. Weather forecasts are calling for above normal precipitation for the heart of the Soft Red Winter Wheat growing regions the next two weeks, with some areas expecting between 5 and 10 inches of rain during this time period, which raises the risks for potential flooding of fields. The Hard Red Winter Wheat growing region of the central and southern plains is experiencing the exact opposite weather issues, as the region is abnormally dry — especially in central and western Oklahoma and Kansas. This morning?s USDA supply/demand report is expected to show U.S. Wheat ending stocks in the neighborhood of 970 million bushels, with a figure +/- 20 million bushels within analysts? estimates. Large speculators are heavily net-short Chicago Wheat futures according to the most recent Commitment of Trader?s report. For the reporting period ending March 1, non-commercial traders were net-short just over 123,000 contracts after adding an additional 12,678 new net-short positions the past week. Commercial traders are on the other side of the trade with a net-long position of nearly 122,100 contracts.??? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Chicago Wheat futures, we notice prices attempting to test the down trend line drawn from the June 2015 high of 628.50. Prices are hovering near the 20-day moving average (MA) but remain well below the key 200-day MA which is currently near the 514.00 price level. The 14-day RSI has rebounded off a near oversold reading to a more neutral 45.76. Chart support remains at the contract low of 449.50 made on March 2. Chart resistance is found at the January 26 high of 499.00.
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