Canada Markets

Wheat Futures Signal a Lack of Concern

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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European milling wheat for September delivery gained EUR 3/mt today while trading sideways overall. The contract is struggling with the resistance of its 50-day moving average. The lower study shows the Sept/Dec contract spread, which shows a weaker trend since December. (DTN ProphetX chart)

In today's DTN Early Word Grains, DTN Lead Analyst Todd Hultman pointed out that the September European milling wheat contract trading on the Euronext Exchange has traded under the contract's 100-day moving average for eight consecutive months, while despite the challenges Ukraine has faced moving grain out of the country and the uncertainty surrounding the extension of the Black Sea Grain Initiative.

The daily chart for the September contract shows a modest EUR 3 gain on Tuesday to close at EUR 232.25/metric ton while failing to close above the contract's 50-day moving average for the eighth time in the past 10 sessions. This follows the contract's failure to close above the contract's 100-day moving average on June 22 and again on June 26, the first test of the 100-day moving average since falling below it on Nov. 10.

Since late April, the September contract has traded over a EUR 39.25/mt range, with today's close falling near the mid-point of the range but in the lower half of the range traded over this period.

The lower study on the attached chart shows a downtrend in the Sept/Dec futures spread since December, signaling a growing bearish sentiment.

Analyst SovEcon has estimated Russia's July exports of wheat could range from 3.7 million metric tons to 4.1 mmt, which compares to 2.8 mmt on average. Outstanding wheat sales as of July 11 are shown at 4.5 mmt, which compares to 2.2 mmt last Friday and a reported 1.1 mmt at the beginning of June. This signals a sudden burst of aggression in export markets, with new-crop supplies added to a record wheat carryout from 2022-23.

Despite growing concerns that the Black Sea deal will end on July 18, only a week away, the European market seems slow to react.

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