Technically Speaking

Just since April 18, Kansas City July wheat has surged $1.20, fueled by several frost/freeze events in key Russian wheat areas with another report of frost over the weekend. That area of Russia and parts of Ukraine has been extremely dry and looks to continue that way.

Consultancy Sov Econ, over the weekend, lowered Russian wheat production by 3.4 million metric tons (mmt) to 89.6 mmt to account for dryness and potential freeze damage. Last week, funds covered much of their net-short KC wheat position by Tuesday and likely bought more Wednesday through Friday, putting them closer to even.

The wheat market, after the early Monday gains, is becoming very overbought technically and could be due for a correction. At the time of this writing, KC July sits at $6.93 with a high of $6.96. A solid cluster of chart resistance is just up above, starting at $7.05, and extending to $7.35. It would appear a rally to that area, assuming Russian dryness does not extend to late May, is likely to encounter plenty of selling.

Keep an eye on December corn futures. Just since February, Dec corn has rallied 50 cents per bushel and in the month of May alone has rallied over 30 cents. Monday's high price at the time of writing is $4.95. Just above, in the $5.00 to $5.05 area, there is very strong overhead resistance. A continued move higher to that area should stop the rally in its tracks in the absence of more bullish news. Although the 2024-25 ending stocks level fell below expectations, the 2.1 billion bushel (bb) carryout is still a comfortable supply. Technically, momentum indicators are reaching the overbought zone and appear primed for a correction, especially if the targets above are hit.

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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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