Wheat Market Faces Decline Amidst Supply Growth and Political Uncertainties

The wheat market experienced a significant decline as fund selling and technical factors came into play. Sluggish export demand remained a negative factor, balancing out concerns related to weather conditions. The USDA reported a decrease in the condition rating of spring wheat, but recent rainfall in the northern US Plains and Canada provided some relief.

Looking ahead to the 2023/24 US wheat outlook, larger supplies are projected, with no changes in domestic use and exports, but higher stocks. The season-average farm price is expected to decrease due to larger supplies in the US and globally. The global wheat outlook for 2023/24 indicates larger supplies, increased consumption, higher trade, and larger stocks. Production is projected to increase in Russia, India, the EU, and Ukraine. Global consumption and trade are also expected to rise. Ending stocks are raised, primarily for India, Russia, and the EU.

Earlier this year, following the easing of concerns about political stability, the market shifted its focus to competitive prices in Russia. Wheat prices saw a significant drop, although speculation about adverse crop weather impacting global production provided support. Uncertainty surrounding the potential non-renewal of the Ukrainian export corridor and its impact on access to Black Sea grain added to the concerns. Russia's prominent role in wheat exports and the potential disruptions raised worries about global trade flows.

According to the European Union's crop agency, Russia's wheat crop for 2023 is estimated at 86.7 million tons, which is 17% lower than the previous year but still above average. Russia continued to dominate the global wheat market. Ukraine emphasized the necessity of utilizing Danube River ports due to Russia's blockade of the Black Sea. Ukraine's grain exports reached 48.4 million tons, and Russian wheat export prices and pace increased.

Recently, wheat prices experienced their largest drop of the year, following a multi-week rally driven by dry conditions in the US and crop damage in China. Rainfall in wheat-planting states and the possibility of more moisture improved crop conditions and led to the decline in prices. Despite the drop, wheat futures remained on track for their biggest monthly gain in several years. The potential withdrawal of Russia from the Black Sea grain initiative added to the volatility of the market.

However, a mutiny in Russia has reignited concerns about political risks and had an impact on wheat prices. Mixed price movements were observed due to concerns about political stability in Russia, followed by a technical and profit-taking retreat. The Paris wheat market ended with a decline due to anticipated rainfall benefiting spring cropping in Europe.

In conclusion, wheat prices are expected to face downward pressure due to larger supplies, while factors such as adverse crop weather and political uncertainties could provide occasional support and contribute to market volatility.

Data for Technical Analysis (5H)

Resistance : 674.72, 676.96, 680.59

Support : 667.46, 665.22, 661.59                        

Source: Investing.com                      

Buy/Long 1 If the support at the price range 666.46 - 667.46 is touched, but the support at 667.46 cannot be broken, the TP may be set around 674.80 and the SL around 665.96, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 674.72 - 675.72, TP may be set around 681.00 and SL around 666.66, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 674.72 - 675.72 is touched, but the resistance 674.72 cannot be broken, the TP may be set around 665.30 and the SL around 676.22, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 666.46 - 667.46, TP may be set around 659.00 and SL around 675.52, or up to the risk appetite.       

Pivot Points Jun 29, 2023 01:28AM GMT

Sources: Agriland, Tastylive