Heavy Snow Damps Soil and Wheat Price Outlook
???? Fundamentals
The heavy snowfall across much of the Great Plains should help ease the worst drought conditions for Wheat since the 1930’s. The Winter Wheat crop went dormant in November, during the worst of the drought, and will emerge again in March. Winter Wheat accounts for roughly 70% of the nation’s total Wheat production.
While the snowfall in much of the region was 20 inches or so, it will not likely break the drought. It should, however, get much of the Wheat that’s already been established out of the ground next month. This will likely be considered a bearish development for Wheat, as yields may very well be much better than previously expected.
The pace of exports has ramped up, which could offset the improved crop outlook to a certain extent. Sales of CBOT Wheat were over 282k for the week ended February 14th, which is somewhat surprising, given the poorer quality of the grain. The wildcard for Wheat is growing conditions around the globe. In recent years, other major producers have had issues, which could potentially limit the downside for Wheat.
???? Technical Notes
Turning to the chart, we see the May Wheat contract continuing to break down after failing to break through the 800 mark on the upside. The result of the two failed attempts to cross this level was a small M-top in the daily chart.
Prices have come down to test minor support at the 700 level. Failure to hold here suggests prices could come down and test support near the 650 mark. RSI is showing extremely oversold conditions after the recent wave of selling, hinting at possible near-term strength.
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