Technically Speaking

Corn, Wheat Prices Pull Back After Spring Rallies

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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The first of two main differences in corn and Chicago wheat in early 2024 is that Chicago wheat traded at new 2024 highs in May and corn did not. The second is that July corn has pulled back closer to its April low in early June than Chicago wheat has, a sign of stronger potential support for wheat. (DTN ProphetX chart)

Corn and wheat prices, two of the three most important food staples on the planet, have a long, similar price history that is easy to see. For several decades, spot corn prices have traded at roughly 75% of the price of spot Chicago wheat with volatile, but typically short-lived swings of prices above and below the long-term average. In the past ten years, corn has traded between roughly 60% and 100% of the price of Chicago wheat. On Friday, June 7, July corn closed at $4.48 3/4 or 72% of the July Chicago wheat price of $6.27 1/2.

Not too long ago, on April 18, both July contracts made their lows for the month at a time when there was little happening to challenge the bearish price outlooks for both commodities. Both prices had been trending lower early in 2024, corn pressured by the anticipation of big crops on the way from South America and wheat held down by the dominance of Russian wheat in world export markets and an early outlook for a similar year ahead in 2024.

Shortly after those lows were made, the U.S. started experiencing wet and stormy spring weather that made planting difficult through May and into early June. Several factors started making specs nervous about holding short positions in wheat, ranging from historically tight supplies in India to adverse weather in Europe and around the Black Sea region. Freeze damage to wheat crops in central Russia, followed by a stretch of hot and dry conditions in eastern Ukraine and southwestern Russia led to a reduction in private forecasts for Russia's wheat crop and estimates are still at risk of being lowered.

Even though there are still concerns about wheat crop conditions around the Black Sea and there is more uncertainty now about how much U.S. corn will be planted in 2024, both prices have fallen back from their recent highs the past two weeks. In the case of July corn, prices reached a peak of $4.75 1/2 on May 13, but never challenged this year's high of $4.93 3/4. July Chicago wheat broke above its 2024 high of $6.46 1/4 and reached a peak of $7.20 on May 28, before falling back below the old high this week.

Technically speaking, July corn is now in a sideways trading range with important support at the old April low of $4.35 3/4 -- a price that is 13 cents below Friday's close. July Chicago wheat is holding above its 100-day average at $6.03, but short-term momentum has turned lower since the May 28 peak, even as prospects for Russia's crops remain challenged by light rains and partial coverage. Winter wheat harvests are starting to pick up in the Northern Hemisphere.

There is are no guarantees corn or wheat prices have a bullish future ahead in 2024; but of the two, July Chicago wheat appears to have better chances for support at the moment. The 100-day average near $6.03 and the May low of $5.93 1/2 are two possible sources of support to watch. Specs have already given corn their bearish vote with 119,933 net shorts in play as of June 4. Noncommercials in Chicago wheat are more undecided with only 18,121 net shorts as of the same date.


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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Todd Hultman