Global Supply Concerns Rise After Russia's Black Sea Ports Attacks

The current 2023/24 U.S. wheat outlook from USDA reflects positive changes this month, as supplies and domestic use increase, exports remain unchanged, and ending stocks rise. These improvements are primarily driven by higher yields and a larger harvested area.

Despite these gains, smaller beginning stocks, partly offset the overall increase in wheat supplies. Consequently, the projected ending stocks for 2023/24 are estimated to be higher than last month's forecast. Additionally, the projected farm price has been adjusted to $7.50 per bushel, a decrease of $0.20 from the previous month.

Meanwhile, global wheat outlook updates for 2023/24 indicate reduced supplies, increased consumption, lower exports, and decreased stocks compared to the previous month's report. The overall supplies are reduced by 0.9 million tons, attributed mainly to lower global production, which is partly offset by larger beginning stocks. Notably, the EU, Argentina, and Canada have experienced reduced production due to ongoing dry weather conditions, particularly in Germany, Spain, France, Italy, and parts of Alberta and Saskatchewan.

Global trade projections for wheat have been adjusted down by 1.0 million tons, as lower exports from Argentina and Canada are only partially compensated by increased exports from Russia. World consumption, on the other hand, has been raised by 3.3 million tons, primarily driven by increased feed and residual use in China, where rains during harvest, especially in Henan province, have negatively impacted wheat quality for food use. As a result of these changes, the projected 2023/24 world ending stocks have been lowered, marking the fourth consecutive annual decline.

The wheat complex experienced significant gains in the market due to fund and technical buying. However, Russia's attacks on Ukrainian Black Sea ports, which occurred after withdrawing from the Black Sea Grain Initiative, have raised global supply concerns and disrupted grain markets. Russia's warning that ships bound for Ukrainian Black Sea ports will be treated as hostile has raised uncertainty about U.S. exports and its potential impact on global food security, particularly for vulnerable nations.

The Black Sea export deal for Ukraine's grain, brokered by the U.N. and Turkey in July of the previous year to combat the global food crisis exacerbated by Russia's invasion of Ukraine, has expired after Russia's withdrawal. Russia has expressed willingness to consider reviving the agreement if its demands for improved exports of its own grain and fertilizer are met. However, the U.N. Secretary-General confirmed that a U.N. pact facilitating Russia's shipments over the past year was also terminated. The situation has led to uncertainty in the grain markets, with expectations of a possible renewal of the deal.

However, Russia's actions have already caused a major rally in grain prices. The attacks on Ukrainian grain infrastructure and ports, including Odessa, have further intensified concerns about global food security and raised questions about the future of the Black Sea grain and fertilizer corridor. Analysts advise monitoring the news for developments in Russia and the region, as any disruptions in grain shipments or a potential deal could significantly impact the markets.

Data for Technical Analysis (5H) CFD US Wheat Futures - Sep 23 (ZWU3)

Resistance : 728.21, 730.33, 733.78

Support : 721.31, 719.19, 715.74                   

5H Outlook

Source: Investing.com                               

Buy/Long 1 If the support at the price range 711.31 - 721.31 is touched, but the support at 721.31 cannot be broken, the TP may be set around 729.64 and the SL around 706.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 728.21 - 729.21, TP may be set around 735.00 and SL around 716.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 728.21 - 729.21 is touched, but the resistance 728.21 cannot be broken, the TP may be set around 720.62 and the SL around 734.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 711.31 - 721.31, TP may be set around 706.00 and SL around 733.00, or up to the risk appetite.       

Pivot Points Jul 20, 2023 02:31AM GMT

Sources: Brownfield Ag News, Investing