Wheat Prices Weak Despite Worsening Crop Conditions
Today’s Spotlight Market
Large speculators have been trimming their net-long positions in K.C. Wheat futures despite new-crop condition woes. The most recent Commitment of Traders report shows non-commercial traders holding a net-long position totaling 27,030 as of May 13th. This was a decline of just over 4,000 contracts from the previous week. Commercial and non-reportable traders are net-short the K.C. Wheat market, although open interest in declining as prices trader near 3 week lows.?? ?
Fundamentals
Wheat futures are getting no love from commodity bulls despite the continued deterioration of the soon to be harvested crop. The USDA reported on Monday that 29% of the winter Wheat crop was rated good/excellent vs. 30% last week. However, 44% of the crop was rated poor/very poor, which was an increase of 2% for the week. To put these numbers in perspective, the 10-year average for this time of year is for 47% of the crop to be rated good/excellent. Crop conditions in Kansas, traditionally the largest Hard Red Winter Wheat producer, are even worse than the national average, as 59% of the Wheat crop is rated poor/very poor due to continued drought conditions.
Although it appears that the? U.S. winter crop may be a disappointment this season,? traders seem more focused on sluggish? U.S. Wheat exports, which are running behind USDA expectations. Buyers continue to purchase Wheat from the European Union as well as the Black Sea region, where wheat prices are at a discount to U.S. prices.? Analysts note that world Wheat inventories are expected to increase in the coming season, with the USDA expecting global Wheat stockpiles to reach 187.4 million metric tons by June of 2015. So unless production issues occur outside the U.S. and Wheat importers are forced to seek U.S. supplies, it may be difficult for Wheat prices to sustain any significant price rally despite lower U.S. production. ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July K.C. Wheat, we notice prices attempting to form a near-term bottom after a nearly $1 per bushel price decline the past several sessions. Trading volume has declined since the start of May, as it appears that long liquidation selling and not the establishment of bearish positions that has been the main catalyst behind the recent price decline.? Prices are sandwiched between the 20 and 200-day moving averages, but are currently hovering below the up-trend line drawn from the early February lows. The 14-day RSI has turned neutral to weak with a current reading of 42.08. 759.00 is seen as the next near-term support level for July K.C. Wheat, with near-term resistance seen at 794.50.?
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