Will ?La Nina? Awaken Slumbering Wheat Market?
Today’s Spotlight Market
?La Nina? or ?the girl? is a lesser known weather phenomenon to the more famous ?El Nino? that we are currently experiencing.? A La Nina usually sees cooling of sea surface temperatures near the equatorial waters of the eastern Pacific Ocean.? For the U.S., this pattern can contribute to drier than normal conditions in the Central Plains and Southeast, with wetter conditions in the Pacific Northwest. ?
Fundamentals
Anyone who has followed the grain markets the past several months will note how quiet the U.S. Wheat market has been, as continued signs of growing world inventories are helping to offset rather bullish U.S. production estimates. On Tuesday, the USDA released its estimates for U.S. Winter Wheat seeding, and it appears that producers have responded to low Wheat prices by curtailing production for the 2016 season. All Wheat planting was estimated at 36.609 million acres, which was 2.85 million acres below last year?s total. In fact, if the figures are accurate, it will be the second lowest Wheat plantings since World War 2. Hard Red Winter Wheat seedlings fell by 2.5 million acres to 26.5 million acres, with Soft Red Winter Wheat seeding down by a more modest 370,000 acres. While the ?seedings? report was deemed bullish by many analysts, the USDA?s grain stocks report had something for Wheat bears. The USDA raised its estimates for U.S. Wheat stocks by 30 million bushels to 941 million bushels. World Wheat inventories are estimated at 232.04 million metric tons, which would be an increase of 2.18 million metric tons from the previous estimate. The wild card for Wheat prices in 2016 could be the weather, as there is some discussion that a ?La Nina? weather event may occur this year. In the past, a La Nina event helped produce cooler and drier conditions in many parts of North America, which has the potential to seriously affect Winter Wheat development this season.
Technical Notes? – View Today’s Chart
Looking at the weekly continuation chart for Chicago Wheat futures, we notice the market has been in a bearish trend since 2008 when historic highs were made. The market has been relatively rangebound the past few months as prices attempt to form a near-term bottom. Prices remain below both the 20- and 100-week moving averages, and the 14-week RSI is neutral to weak, with a current reading of 42.07. 456.00 is seen as near-term support for the lead month March futures, with resistance found at the October 2015 high of 531.50.
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