Wheat Prices Under Pressure Amidst Global Supply Challenges

The wheat complex experienced a decline in prices due to selling pressure from funds and technical factors. The main bearish factor is the sluggish export demand for U.S. wheat, with Russia dominating the market. However, there's some increased competitiveness in the Chicago-traded Soft Red Winter wheat, which might stimulate demand. As of now, inspections lag behind the previous year's pace, with top destinations being the Philippines and Japan.

Looking at the U.S. wheat outlook for the 2023/24 marketing year, there's a decrease in supplies, slightly lower domestic use, reduced exports, and higher stocks. Wheat production is predicted to be slightly lower, primarily due to lower Other Spring and White wheat production. Domestic use has been adjusted downward based on the Flour Millings Products report. Wheat exports are reduced due to weak sales, especially for Hard Red Winter wheat. Despite the increase in ending stocks, they are still below the five-year average. The projected farm price remains unchanged at $7.50 per bushel.

On the global scale, the 2023/24 wheat outlook includes reduced supplies, lower consumption, decreased trade, and lower stocks. Supply reductions are attributed to decreased production in the EU, China, and Canada, partly offset by increases in Ukraine and Kazakhstan. Consumption and trade are also lower due to various factors, including feed and residual use reduction and lower exports from Canada and the United States. Despite higher production, Ukraine's exports remain steady. Projected global ending stocks for 2023/24 are at their lowest since 2015/16.

Meanwhile, wheat futures experienced a slight drop when a second vessel left Ukraine, even in the face of Russian threats, utilizing a temporary route in the Black Sea without encountering any Russian hostilities. U.S. authorities hold a positive view regarding the continuity of grain shipments from Ukraine, with the goal of aligning with export averages before the invasion.

European wheat prices fell for a second session due to ample global supplies, particularly from Russia. Russia's wheat exports in August are estimated to increase. Turkey's president plans to discuss the collapsed UN deal on Black Sea grain exports with Russia. The market is primarily focused on potential future exports, with Russian wheat currently maintaining a dominant position in the global wheat export market. German wheat crop is expected to decrease due to rain damage, while traders reported recent sales to Morocco and Indonesia, indicating market activity amid challenging global supply pressures. European wheat prices are therefore sensitive to factors including global supply-demand dynamics, weather conditions, and geopolitical events.

Conversely, Ukraine's production of grains exceeds its domestic consumption, necessitating exports. Nonetheless, Ukraine's potential for exporting is confined to minor river ports and its border with the EU. This situation has led to a transition from focusing on grain to emphasizing oilseeds, as export opportunities are restricted. Despite these obstacles, Ukraine is projected to achieve an increased grain output in 2023, attributed to enhanced yield. Hence, it is anticipated that wheat prices will continue to face downward pressure in this timeframe.

Data for Technical Analysis (5H) CFD US Wheat Futures - Dec 23 (ZWZ3)

Resistance : 604.70, 605.88, 607.80

Support : 600.86, 599.68, 597.76                             

5H Outlook

Source: Investing.com                   

Buy/Long 1 If the support at the price range 598.86 - 600.86 is touched, but the support at 600.86 cannot be broken, the TP may be set around 605.96 and the SL around 598.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 604.70 - 606.70, TP may be set around 609.00 and SL around 600.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 604.70 - 606.70 is touched, but the resistance 604.70 cannot be broken, the TP may be set around 600.94 and the SL around 607.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 598.86 - 600.86, TP may be set around 597.00 and SL around 606.00, or up to the risk appetite.       

Pivot Points Aug 30, 2023 07:22AM GMT

Sources: Successful Farming, Clayton County Register