Technically Speaking

For months, the wheat markets had been under serious bearish pressure primarily due to Russia's nearly complete dominance of world export markets, but also the sheer lack of U.S. wheat exports. Finally, additional soft red winter wheat sales to China have been confirmed, with a new sale of 440,000 mt, or 16.1 mb, sold to China for 2023-24.

As of November 28, the CFTC reported that managed money funds were carrying a large net short position of 124,000 contracts, with fund managers also short just under 50,000 contracts of KC wheat. The size of the new sale announced seemed to catch traders by surprise and encouraged funds to take some of their short position risk off the table. In the last three trading days, not only did Chicago March rise above the 20-day average but is now trading above the 50-day moving average. That is typically a signal for funds to reverse. Momentum is on the side of the wheat rally extending, but Chicago March will need to exceed the October high at $6.31 to get the ball rolling. At the time of this writing, March wheat is just 7 cents away from that level.

March corn is also showing signs of life early on Monday, with a rally above the 20-day moving average. A solid close above this level on Monday could encourage funds, which are reportedly short over 200,000 contracts, to also cover some of that short. U.S. export sales are picking up some steam, and we have a competitive advantage to Brazil now.

Momentum is positive in corn, but March needs to rise and close above the $4.96 level, which coincides with the 50-day average, to get traders excited. In the meantime, March corn is still in the midst of a bearish trend. Traders expect the USDA to lower Brazil corn production due to early heat and dryness and a tardy soybean planting pace. Although the ending stocks number on corn is still bearish, we have yet to see any kind of substantive post-harvest bounce.

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The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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