Technically Speaking

Chart Analysis: U.S. Wheat Futures

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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Over the past 13 years, the December contract of KC wheat has briefly tested prices below $4.00, but has been unable to sustain selling below $4.00. The fundamental outlook for wheat prices remains bearish, but prices are holding above well-tested support (DTN ProphetX chart).

December KC Wheat: December KC wheat didn't see much excitement in October, ending the month with a gain of 4 3/4 cents. Friday's higher close of $4.26 may give managed futures funds a little anxiety about their net shorts, but it's the monthly chart they should be concerned about. The fundamental outlook for KC wheat remains clearly bearish with USDA expecting over 1 billion bushels (bb) of U.S. ending wheat stocks in 2019-20 and record high world ending-wheat stocks, so the bearishness of funds is understandable. However, over the past 13 years, December KC wheat prices have not been able to sustain selling below $4.00 -- a well-tested line of support. Prices are likely to hold sideways through winter, but are also vulnerable to a bullish surprise at these cheap levels.

December Chicago wheat: December Chicago wheat finished the month of October with a 13-cent gain and added another 7 1/4 cents Friday to finish the week at $5.16. The Chicago contract remains the least bearish behaving of the three U.S. wheats, having received support this year from a smaller SRW wheat crop, related to excess moisture in early 2019. Friday's close is slightly below the midpoint of the five-year range, a much higher level compared to the other wheats. With noncommericials slightly net long in Chicago wheat and winter on the way in the Northern Hemisphere, prices are likely to trade roughly sideways until next spring.

December Minneapolis Wheat: After a decent price rebound in September, December Minneapolis Wheat experienced a correction in October, falling back 20 1/2 cents. Friday's higher close at $5.31 1/4 is technically similar to KC wheat in that Minneapolis prices are in a bearish fundamental situation, but are also holding above long-term support. Over the past 12 years, $4.77 is the lowest price December Minneapolis wheat has traded as selling efforts below $5.00 have been short-lived. This year's September low of $4.86 1/2 was the most recent failed attempt. With prices well above $5.00 again, the monthly stochastic has turned higher -- a bullish change of momentum that should concern noncommercials and managed futures funds holding net short positions.

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 .



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