Wheat Market Sees Mixed Trends Amid Export Concerns

In the wheat market, recent developments show mixed trends with a slight upward bias. Anticipated fund inflows at the start of the new month and oversold short-term technical indicators raise the likelihood of a bounce by the end of the week.

Wheat prices were expected to rebound, but sluggish export demand has limited the extent of the increase. China's wheat purchases have garnered attention, with the primary concern being the proportion of these acquisitions originating from the United States. While some sales have been made in recent weeks, China notably acquired 2.5 million tons of wheat from Australia and France, despite Russia dominating with the lowest prices and a significant share of the global market. Ukraine, in the face of Russian attacks on infrastructure and Moscow's interference in the Black Sea Grain Initiative, has found alternative routes to export its grain. However, exports are currently lagging behind last year's figures.

In the European Union, soft wheat exports for the 2023/24 season have been lower compared to the previous year, primarily due to increased competition from Russia. Nevertheless, large sales of French wheat to China are expected to boost EU exports in the coming months.

Argentina, the leading wheat producer and exporter in South America, has seen its wheat production forecast for the 2023-24 marketing year revised downward by the USDA Foreign Agricultural Service due to a three-year drought and prolonged dry conditions. The ongoing drought has affected yields, with an estimated 13% decrease compared to the past decade's average. Wheat exports have been adjusted down to 10 million tonnes, although this projection is notably higher than the previous year's drought-impacted figure of 3.9 million tonnes.

The International Grains Council has adjusted its forecast for global wheat production for the 2023-24 season, with upward revisions for Ukraine, Russia, and the United States. However, Australia's wheat crop outlook has deteriorated.

In the wheat futures market, prices edged slightly higher, with the most-active CBOT December contract staying within the previous day's trading range. This rebound came after contract lows were reached due to profit-taking and persistent dry conditions in Argentina. Futures had been under pressure due to increased prospects for Russian exports and Ukraine's continuous movement of agricultural products through the Black Sea. Some bearish investors who had sold wheat contracts have now reentered the market.

Conversely, Chicago wheat prices fell to match the three-week low observed on Tuesday. This drop can be attributed to Russia's strong exports at competitive prices, leading to ample supplies, as well as subdued demand and reduced concerns about smaller crops in Southern Hemisphere exporting countries. Despite this, current prices are considered low enough to encourage demand for U.S. wheat.

Furthermore, Ukraine's new Black Sea export corridor's success has led to a significant increase in rail wagons heading to ports in the Odesa region. Since July 2023, Ukraine has managed to establish an export corridor through its Black Sea ports, handling over one million tonnes in October. Ukraine's wheat harvests for this year showed marginal increases, but they remained substantially lower than the 2021 levels. China is expected to import record quantities of wheat this year due to crop damage caused by rain, with potential demand for U.S. and Canadian supplies.

In the Black Sea region, dry bulk exports have increased, primarily driven by Russian wheat exports. However, overall export volumes in the Black Sea are still 20% lower than in 2021 due to the loss of Ukrainian cargoes following the conflict. The increase in Russian wheat exports is seen as beneficial for global food security and shipping, despite challenges such as the end of the Black Sea Grain Initiative, damage to port infrastructure in Ukraine, and ongoing war risks. Hence, it could lead to wheat prices remaining within a narrow and downward trading pattern, subject to continuous downward pressure.

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

Resistance : 563.97, 564.77, 566.07

Support : 561.37, 560.57, 559.27                            

5H Outlook   Source: Investing.com  

Buy/Long 1 If the support at the price range 556.37 - 561.37 is touched, but the support at 561.37 cannot be broken, the TP may be set around 564.34 and the SL around 553.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 563.97 - 568.97, TP may be set around 570.34 and SL around 558.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 563.97 - 568.97 is touched, but the resistance 563.97 cannot be broken, the TP may be set around 560.94 and the SL around 570.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 556.37 - 561.37, TP may be set around 551.00 and SL around 567.00, or up to the risk appetite.       

Pivot Points Nov 2, 2023 03:37AM GMT