Wheat prices expected to be under pressure

Wheat futures fell substantially on fund and technical sell-offs, including a surge in the dollar in the previous session and the extension of the Black Sea Grain Initiative, which has alleviated concerns over global agriculture supplies. While spring wheat harvest progress is still slower than typical, warmer and drier weather trends in most of the northern plains of the United States, as well as arid weather in Argentina, Canada, and Russia, might have an impact on crops.

For an additional two months, the Black Sea Grain Initiative has been extended to enable Ukraine to keep exporting grains. The agreement's provisions are still ambiguous. Russia has been pressing for the lifting of sanctions amid its escalating onslaught on Ukraine, which has interfered with the sowing of spring grains there.

According to the most recent USDA report, the US wheat outlook for 2023–2024 calls for a decrease in supply and exports, an increase in domestic use, and smaller stocks than in 2022–2023 when the total US wheat yield is anticipated to be 1,659 million bushels, only marginally higher than the year before due to larger harvested areas.

Due to increased use in animal feed, total domestic consumption of US wheat in 2023/24 is predicted to increase by 1% over the previous year. US wheat exports are down 3% year on year and are forecast to be 50 million bushels fewer than last year, while year-end inventories are expected to be 11% lower than last year, the lowest in 16 years. The average seasonal farm-front price is predicted to be $8.00 per bushel, a $0.85 decrease from the previous year.

The global wheat outlook for 2023/24 anticipates a decline in supply, trade, consumption, and stocks compared to 2022/23, with global wheat production expected to reach a record high of 789.8 million tons, up 1.5 million tons as the harvest grows in Argentina, which is expected to recover from the drought, Canada, which is expanding farmland, the European Union, which is experiencing above-average rainfall, including China, and India, which are expected to offset decreased harvests in Russia due to restricted arable land and output, Ukraine, with a 21% drop from a year ago due to war effects, including in Australia and Kazakhstan.

Global wheat consumption is predicted to reduce by 3.0 million tons this year compared to the previous year due to lower animal feed use, while increased supply in 2023/24 has put pressure on wheat prices. The recent worldwide wheat prices are around 45% lower than the prices in mid-May 2022, owing to decreasing wheat consumption in Ukraine, India, Russia, and China. While global wheat trade is expected to decline 5.5% million tons from 2022/23. Russia is expected to remain the largest exporter of wheat, followed by the European Union, Canada, Australia, the United States, and Argentina, offsetting Australia, India, and Ukraine's sharp export declines.

In Russia and the EU, year-end inventories are predicted to fall by 1.9 million tons in 2023/24. However, it is anticipated to rise in China and India. Wheat prices are projected to continue under pressure throughout this period due to low demand and abundant supply, as well as concerns regarding the temporary resolution of the Black Sea Agreement. However, uncertainties about productivity, wars, and trade may cause wheat prices to rise again in the future.

Data for Technical Analysis (1H)

Resistance : 610.28, 610.96, 612.07

Support : 608.06, 607.38, 606.27                       

1H Outlook

Source: Investing.com               

Buy/Long 1 If the support at the price range 607.00 - 608.06 is touched, but the support at 608.06 cannot be broken, the TP may be set around 610.34 and the SL around 606.70, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 610.28 - 611.28, TP may be set around 612.30 and SL around 607.35, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 610.28 - 611.28 is touched, but the resistance 610.28 cannot be broken, the TP may be set around 607.44 and the SL around 611.50, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 607.00 - 608.06, TP may be set around 605.80 and SL around 609.90, or up to the risk appetite.       

Pivot Points May 19, 2023 02:07AM GMT

Sources: Brownfield Ag News, Financial Post