Wheat Market Faces Uncertain Outlook

In the wheat market, recent developments indicate a mixed and somewhat uncertain outlook. While there were early gains in pre-holiday trade, the wheat complex struggled to maintain momentum. Notably, China purchased 110,000 tons of 2023/24 U.S. soft red winter wheat, marking the first official confirmation of such transactions in weeks. However, overall export demand remains sluggish due to Russia's competitive pricing advantage.

Wheat futures have seen an increase amid dry weather in parts of the U.S. southern Plains, with concerns about precipitation deficits in key wheat-producing areas like southwestern Kansas and the Oklahoma and Texas panhandles.

Recent airstrikes by Russia in Ukraine have damaged crucial port infrastructure, particularly in Odesa, a key hub for wheat exports in the Black Sea region. Despite Ukraine finding alternative routes, such as using a significant port in Romania, Odesa remains pivotal to export activities.

Looking ahead to the 2023/24 U.S. wheat season, the forecast includes larger supplies, decreased domestic use, unchanged exports, and higher ending stocks. The increase in supplies is attributed to higher imports, while domestic use is projected to decrease, particularly in the food sector based on the latest NASS Flour Milling Products report. As a result, ending stocks are raised, and the season-average farm price is lowered.

Globally, the 2023/24 wheat outlook anticipates increased supplies, slightly lower consumption, reduced trade, and larger ending stocks. The decline in global production is primarily attributed to decreases in various countries, including India, Argentina, Kazakhstan, the United Kingdom, and Brazil. Russia, on the other hand, is expected to contribute to a 5.0-million-ton increase in production. Trade projections are lowered, mainly due to decreased exports from Argentina, India, and Egypt, partially offset by an increase for Ukraine. Global ending stocks are raised, with larger forecasts for Russia, China, and Argentina compensating for declines in India, Ukraine, and Brazil.

China's continued purchases of U.S. soft red winter wheat are welcomed by U.S. farmers, especially considering the recent erosion of wheat exports over the years. China's total U.S. wheat purchases for the current season are projected to exceed 920,000 metric tons, primarily consisting of SRW wheat, commonly used for various food products and as animal feed.

In the European Union, soft wheat exports have decreased by 19% since the start of the 2023/24 season, largely due to strong competition from Russia. However, large sales of French wheat to China may boost EU export pace in the coming months. EU wheat imports have increased, with Spain leading as the main recipient.

Moroccan wheat professionals are exploring diversifying supply sources and considering entry into the Russian market. Discussions with Russian suppliers focus on addressing challenges related to performance banking and communication, with importers suggesting measures to secure grain shipments from the Black Sea to Morocco. Despite challenges, Morocco assures the public of market stability and sufficient resources to meet consumer needs.

Algeria's state grains agency is believed to have purchased around 90,000 to 100,000 metric tons of milling wheat in an international tender. Prices and shipment details indicate a likely sourcing from the Black Sea region.

The trajectory of wheat prices in this period suggests a likelihood of ongoing fluctuations within the lower range. The medium-term support for these prices is anticipated to be influenced by various factors, including geopolitical risks, weather conditions, and global dynamics related to supply and demand, with a primary focus on trade activities involving China and Russia.

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

Resistance : 561.24, 562.94, 565.71

Support : 551.23, 554.00, 555.70                    

5H Outlook 

Source: Investing.com

Buy/Long 1 If the support at the price range 549.70 - 555.70 is touched, but the support at 555.70 cannot be broken, the TP may be set around 561.24 and the SL around 546.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 561.24 - 567.24, TP may be set around 574.00 and SL around 552.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 561.24 - 567.24 is touched, but the resistance 561.24 cannot be broken, the TP may be set around 553.82 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 549.70 - 555.70, TP may be set around 543.00 and SL around 564.00, or up to the risk appetite.       

Pivot Points Nov 22, 2023 10:56PM GMT