While this week's wheat market focus is the difficult conditions faced by producers in the northern states, as seen in the spring wheat tour taking place this week, it is interesting to note that U.S. winter wheat futures led the U.S. futures higher on July 29, while Black Sea wheat futures rose along with European milling wheat futures.
Wheat production in Europe does not seem a problem in 2021. USDA recently estimated Europe's all-wheat production at 138.2 million metric tons (mmt), 9.7% higher than achieved in 2020-21. European Union statistics point to soft wheat production rebounding to 126.780 mmt, up 7.3% from 2020-21 and 3.1% higher than the five-year average.
While quantity is not a problem, heavy rains in western Europe in recent weeks along with a continued forecast of showers over the continent over the next week will lead to harvest delays and growing concerns over quality.
As seen on the accompanying chart, the September European milling wheat contract formed a bullish gap higher in Thursday's trade, closing up EUR 4.50/mt to end at EUR 220.75/mt. This was the largest one-day gain seen in nine sessions, e despite Euro strength against the U.S. dollar.
While Wednesday's gain saw price end above the 50% retracement of the move from the contract's April high to July low, Thursday's move saw price close above the 61.8% retracement, as shown by the horizontal purple line at EUR 219.27/mt. While not shown, the 66.7% retracement is calculated at EUR 221.10/mt and Thursday's session failed to sustain a move above this resistance. A sustained move above this level could signal a continued move to test the contract high at EUR 233.50/mt.
The lower study shows daily volume in this contract rising for four consecutive sessions; at 28,109 contracts, this is the highest daily volume seen in one month.
Cliff Jamieson can be reached at firstname.lastname@example.org
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