Technically Speaking

Three US Wheats Diverge

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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September Minneapolis wheat is currently the most bullish of the three U.S. wheats with persistent drought conditions in spring wheat areas. (DTN ProphetX chart)

KC WHEAT:

July Kansas City wheat closed down 10 3/4 cents last week at $6.13 1/4. After hitting $7.41 1/2, the highest price for a July KC wheat contract since May 7, 2014, prices have fallen lower, pressured by beneficial rains in the latter half of May and by generally favorable wheat crop conditions around the world. July KC wheat fell below its 100-day average at $6.30 on May 20, becoming the most technically bearish contract of the three U.S. wheats. Judging by the weekly stochastic, there is still a chance wheat prices could find support near or above the March low of $5.59 1/2. One factor in KC wheat's favor is noncommercial net longs are not burdensome at 24,260. The 100-day average is currently at $6.31 and a close back above that, if it happened, would turn the trend up again. Weather remains the main influence on prices as winter wheat crops approach harvest and some support is likely coming from spring wheat's drought problems.

CHICAGO WHEAT:

July Chicago wheat closed down 10 3/4 cents last week, ending at $6.63 1/2. The contract had one close below its 100-day average at $6.57 last week, on Wednesday. Prices were back above the average Thursday, however, and closed solidly above the average Friday. Chicago wheat is currently holding a sideways trading range that could allow prices to retest the May high. Also, in favor of higher Chicago wheat prices are noncommercials, which are lightly net long with just 18,411 contracts. Of the three wheats, USDA's estimate of the ending stocks-to-use ratio for soft red winter wheat is the smallest (most bullish) at 37%. On a weekly chart, July Chicago wheat prices have been volatile in April and May but have not broken below important support at $6.39 1/2.

MINNEAPOLIS WHEAT:

September Minneapolis wheat closed up 27 3/4 cents last week, finishing Friday at $7.33 1/2. With North Dakota and surrounding areas blanketed in extreme to exceptional drought conditions, this year's spring wheat crops received their lowest good-to-excellent rating from USDA since 1988. It is no surprise that Minneapolis wheat prices are currently the most bullish acting of the three U.S. wheats. September Minneapolis wheat has not fallen below its 100-day average since early April, although price did get within 4 cents of the average on May 26. From a longer-term perspective, September Minneapolis wheat prices have challenged the $8.00 mark three times in the past eight years but have not finished the month above $8.00 since May 2013. Technically and fundamentally, September Minneapolis wheat has a good chance of breaking above $8.00 in 2021 and will likely remain the most bullish wheat for much of 2021.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities and futures contracts involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at: Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman1

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