U.S. winter wheat prices headed to Christmas on a bullish note, trading above $8.00 and not far from their highest prices of the year. In the final week of 2021, however, March Chicago wheat fell lower in four of the five trading days, losing 44 cents as it finished at $7.70 3/4, managing to stay only slight above its 100-day average at $7.69. Fundamentally, USDA has estimated ending stocks of SRW wheat at 93 million bushels (mb), their second lowest level in 14 years. Normally, that would be tight enough to keep prices well supported through winter. But the one thing we don't know is if end users have satisfied their buying needs for the season. Technically speaking, the trend remains up, but a close below the December low of $7.51, if it happened, would confirm the end of Chicago wheat's uptrend.KC Wheat:
Similar to Chicago wheat, March KC wheat was sitting at $8.61 1/2 the day before Christmas Eve, but then came back from the holiday and quickly dropped 60 cents to finish the final week of 2021 at $8.01 1/2. The difference between Chicago and KC wheat is that March KC wheat is 26 cents above its 100-day average, a wider margin of safety for the uptrend. USDA estimates ending stocks of HRW wheat at 309 mb, the lowest in seven years. Although old-crop supplies of HRW wheat are not as tight as SRW wheat, HRW wheat has a serious drought concern for the new crop, currently dormant in the southwestern Plains. Technically speaking, the trend remains up for March KC wheat with important support at $7.75.
March Minneapolis wheat fell 50 1/2 cents, from $10.32 1/2, to $9.82 in the final week of 2021, its lowest close in over two months. At best, prices finished in a sideways trend; but a close below the 100-day average at $9.63, if it happened, would turn the trend down at a time when noncommercials are heavily net long and vulnerable to selling. The sudden weakness in prices at the end of 2021 is a bit puzzling as USDA estimates ending stocks of HRS wheat at just 132 mb, the lowest in 14 years. The highest spot price of $10.86 1/2, made in early November, was clearly a good selling opportunity. But with the next spring wheat crop several months away from even being planted, I can't confidently say there won't be another challenge of the November high. Increased precipitation across the northwestern U.S. may have played a part in easing bullish pressures on Minneapolis wheat late in 2021; but drought is still a concern in many areas.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at firstname.lastname@example.org
Follow him on Twitter @ToddHultman1
(c) Copyright 2022 DTN, LLC. All rights reserved.