March Minneapolis wheat fell 12 1/2 cents last week to $5.47 1/2, failing after a brief test of its three-month high. Of the three U.S. wheats, the Minneapolis contract has shown the least bullish behavior since the lows of early September and Friday's close posted an outside bearish reversal, which suggests lower prices ahead. From a larger perspective, there is room for Minneapolis wheat prices to correct back from the recent rally, but it is difficult to expect much downside risk while noncommercials are holding largely neutral positions as of Jan. 21. The August low of $5.00 is a three-year low and should hold as support. A close below the 100-day average at $5.38, if it happened, would strengthen the bearish argument for March Minneapolis wheat prices.
Kansas City Wheat:
March Kansas City wheat finished down 8 1/4 cents last week at $4.86, falling back after a failed attempt to trade above $5.00. In addition, last week's turning point of $5.04 3/4 is now the highest price of the past six months -- a common area to find resistance for a bear market rally. There is always a chance for a bullish surprise in wheat, and it is possible that Russia's wheat crop is smaller than advertised. From a technical view however, the $5.00 mark offers firm resistance as the weekly stochastic is close to turning down, suggesting upward momentum is waning.
March Chicago wheat showed its bullish fundamental advantage again last week, finishing the week 3 cents higher at $5.73 1/2, after posting a new one-year high Wednesday at $5.92 1/2. USDA's estimate of 106 million bushels (mb) of ending SRW wheat stocks is the lowest since 2013 and has kept the demand side of the market nervous about obtaining supplies. Technically speaking, March Chicago wheat could have resistance in this area, and the weekly stochastic is close to turning down, but prices have not yet broken any significant support. As of Jan. 21, 59% of noncommercial positions are long in Chicago wheat, a modestly bullish position that seems reasonable in these circumstances. With fundamentals for SRW wheat this bullish, March Chicago wheat would have to drop below $5.40 to turn bearish.
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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