Technically Speaking

Chicago Wheat Offers Surprise Rally in May

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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July Chicago wheat surged higher for a third time in the past five weeks, closing near $7 for the first time since August 2023. Specs have covered most of their net short positions and wheat crops around the Black Sea are being stressed by dry weather. (DTN ProphetX chart)

Less than three months ago, July Chicago wheat prices were trading near $5.38 a bushel, their lowest prices in more than three years. Trader sentiment was extremely bearish, especially after the U.S. wheat market, desperate for any export sales, got news that China reneged on previous purchases of SRW wheat from the U.S.

After Russia dominated wheat export sales the past two years, there was not much left for U.S. producers and 2023-24 exports are on track for their lowest total in more than 50 years.

Wheat prices perked up on April 19 and have traded higher since, closing up 46 cents at $6.97 1/4 in the week ending May 24, the Friday before Memorial Day. The 26% rally in five weeks caught specs that were heavily net short off guard, having to buy back net short positions that had hardly been threatened the previous eight months. New bullish factors included historically low wheat stocks in India, freeze events in northern Europe, central Russia and northern Ukraine and most recently, a dry forecast in Ukraine and southern Russia exacerbating already dry crop conditions.

On May 10, USDA helped the bullish cause, estimating the lowest world ending wheat stocks, excluding China, in 17 years. NASS also estimated 2024 SRW wheat production at 344 million bushels, down 23% from last year's crop.

Technically speaking, the trend in July Chicago wheat turned up April 24 as prices closed above the 100-day average. The next area of obvious resistance is $8 on a weekly chart, so prices may have more room to trade higher; of course, there are no guarantees. Fundamentally speaking, much will depend on Russia's ability to produce a crop this year, meaning once again, it comes down to weather. For now, price momentum is bullish with specs showing little interest for the short side of the market.


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.

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