Bearish USDA Report For Wheat, Leads Grain Market Slump
?? Fundamentals
Neutral carry-out data from the USDA for Corn and Soybeans was overshadowed by bearish export estimates for Wheat, putting bears in control of grain prices on Tuesday, as a sea of red overwhelmed many grain traders’ quote screens. The USDA crop production and supply/demand report for December was released on Tuesday, and contained only a few surprises.
The biggest change seen was for the Wheat complex, where the USDA lowered its forecast for U.S. exports by 50-million bushels to 1.05 billion bushels, as high domestic prices and strong export competition appear to be hurting U.S. sales.
Many traders were anticipating that the U.S. would start to see some increased Wheat export business, as inventories from Russia and Europe start to get tight. However, the U.S. was shut out of a recent tender for Wheat from Iraq, as Australian and European Wheat was purchased. This may signal that U.S. prices may need to fall further to attract buyers.
Corn traders saw little change in U.S inventories, with the USDA keeping its estimate for 2012-13 Corn carryout at 647 million bushels, as it made no changes to its estimates for Corn exports or Ethanol usage.
Soybean figures were a bit more positive for grain bulls, as continued strong demand for Soybean Meal had the USDA increase its Soybean crush estimate by 10 million bushels, which lowered the 2012-13 carry-over by the same amount to 130 million bushels. Many traders were disappointed that U.S. Soybean exports were left unchanged, despite strong demand from China.
?? Technical Notes
Looking at the daily chart for March Wheat, we notice prices trading below the lows of the recent price consolidation, which appears to have triggered some sell-stops below previous support levels. Prices are now moving towards long-term support at the 200-day moving average, which is currently near the 807.00 price area.
The 14-day RSI has now just moved into oversold territory, with a current reading of 29.48. The next resistance level is seen at the 20-day moving average, currently near the 862.25 price area.
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