Wheat Prices Challenging Support
May KC wheat closed up 40.25 cents at $11.10 3/4 on the week ended Friday, March 25, maintaining the uptrend that began on Feb. 22 and has been fueled by Russia's invasion of Ukraine. The obvious concern of the wheat market is that Russia's attack will disrupt the winter wheat harvest of the world's fourth largest wheat exporter and prevent the movement of whatever harvest occurs from leaving the country. News over the weekend that Russian forces are pulling back to eastern Ukraine seems to be giving traders encouragement that farming has a chance to take place in the remaining areas of the country. Technically, prices have been trading above the 25-day average since early February but are now in danger of closing below the average at $10.76. It is also interesting that the May/July KC wheat spread showed an extremely large May premium over the July price in the early stages of the war, but that premium has narrowed from a peak of 64 cents and is trading at less than 3 cents early Monday, a sign the early buying panic has nearly disappeared. Since Russia's invasion began, open interest has declined 15% in KC wheat futures, a consequence of excessive volatility. A close in May KC wheat below $10.76, if it happened, would confirm an end to the uptrend. Another source of possible support is the recent low at $10.35 1/2.CHICAGO WHEAT:
May Chicago wheat closed up 38 1/2 cents at $11.02 1/4 for the week ended Friday, March 25. Like KC wheat, May Chicago wheat had an explosive rally in late-February and early-March that peaked at $13.63 1/2 on March 8. Since then, prices corrected lower, but have held above the 25-day average at $10.76 before Monday. Lower trading Monday finds prices below the average for the first time since early February. If prices close below the average, it would confirm a bearish change in the uptrend. Open interest in Chicago wheat has declined 9% since Russia's attack began and noncommercial positions lean slightly bullish with 9,490 more longs than shorts.
May Minneapolis wheat closed up 44 cents at $11.04 1/4 for the week ended Friday, March 25, continuing to close above the 25-day average for a month and a half, while Russian forces tried, but so far have failed, to take control of one of the world's most fertile crop areas and important grain ports. Weekend news reports that Russian forces are pulling back are casting doubt on Russia's ability to secure the entire country and are giving hope that some production may be able to take place in Ukraine in 2022. Throughout the past month, Minneapolis wheat has shown the least bullish technical behavior of the three U.S. wheats. A close below the 25-day average at $10.72, if it happened, would confirm the end of an uptrend that has sputtered since early March.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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