Global Tensions, India's Strategy, and European Weather

In the realm of the wheat market, recent developments have led to fluctuations driven by a mix of fund and technical selling. Dry weather concerns extend beyond the US, encompassing Canada, Argentina, and Australia. Meanwhile, the persistent conflict between Russia and Ukraine continues to introduce uncertainty to the wheat market. Russia, holding a considerable price advantage in the export sector, has even secured a fresh deal to supply Egypt with 235,000 tons of wheat. The market's attention is also fixed on India, awaiting the government's decisions concerning wheat tariffs and imports.

A growing confrontation in the Black Sea region presents a complex situation for wheat trade. Recent attacks by Russia and Ukraine on each other's port facilities could potentially disrupt vital grain exports, potentially impacting global food prices. Yet, an unexpected twist may emerge as these attacks could prompt both nations to seek a new grain agreement, recognizing their shared interests.

Continued strikes on Danube ports could severely impact Ukraine's revenue stream, given that agriculture constitutes a significant portion of its export income. In contrast, Russia, being the world's largest wheat exporter, has managed to ship a remarkable 45.5 million metric tons in the most recent season, contributing to a decline in global wheat prices.

While fluctuations in wheat prices have been observed due to uncertainty surrounding the unraveling of the previous grain deal, the market remains relatively stable due to expectations of abundant harvests. Despite the occasional spikes triggered by these tensions, prices have generally maintained a lower trajectory. However, the situation might change if a new grain agreement materializes.

The United States is committed to facilitating Russia's food exports if a renewed agreement for secure Black Sea grain transportation emerges. Nonetheless, the tension surrounding the Black Sea region has contributed to speculations about potential impacts on Russia's export figures. Russia's agriculture ministry has forecasted an 8% decrease in grain exports during the 2023/24 season, with wheat exports projected to decline slightly.

Shifting our focus to India, the country plans to address supply and price stability concerns by providing 5 million metric tons of wheat and 2.5 million tons of rice to bulk consumers. As the world's second-largest consumer of wheat and rice, India aims to enhance availability and lower prices through various strategies, such as restricting non-basmati white rice exports and imposing stock limits on wheat. With ample wheat and rice reserves, the government can intervene in the open market to stabilize prices.

Despite limited supplies causing a surge in wholesale wheat prices to a six-month peak, India's move to release wheat stocks alongside Egypt's purchase of Russian wheat and India's potential reduction in wheat import tariffs has helped alleviate concerns about disruptions to Black Sea trade due to regional conflicts.

Meanwhile, recent weather patterns in Europe, specifically heat waves and insufficient rainfall, pose challenges for wheat yields. Regions like Greece, eastern Spain, and southern Italy are grappling with exceptionally high temperatures, prompting downward adjustments in soft wheat yield projections for the marketing year 2023-24. These adverse conditions, coupled with potential export restrictions, could lead to decreased wheat supply and consequent price fluctuations in the European market.

Data for Technical Analysis (1H) CFD US Wheat Futures - Sep 23 (ZWU3)

Resistance : 641.01, 641.68, 642.77

Support : 638.83, 638.16, 637.07                              

1H Outlook    

Source: Investing.com         

Buy/Long 1 If the support at the price range 637.83 - 638.83 is touched, but the support at 638.83 cannot be broken, the TP may be set around 641.59 and the SL around 637.33, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 641.01 - 642.01, TP may be set around 642.77 and SL around 638.33, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 641.01 - 642.01 is touched, but the resistance 641.01 cannot be broken, the TP may be set around 638.74 and the SL around 642.51, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 637.83 - 638.83, TP may be set around 637.07 and SL around 641.51, or up to the risk appetite.       

Pivot Points Aug 10, 2023 02:33AM GMT

Sources: Hellenic Shipping News, Barchart