Wheat Volatility Amid Weather Challenges, Export Opportunities, and a Stable Outlook

In the wheat market, recent increases were driven by both commercial and technical buying, coupled with a weaker dollar. Heavy rainfall in France resulted in a 5.1% reduction in soft winter wheat planted area compared to the previous year, and Australia faced quality concerns due to drought followed by late heavy rainfall. These conditions could create export opportunities for the U.S. in 2024. 

Russia remains a significant player in wheat exports, while recent strong demand from China impacted U.S. soft red winter wheat supply and prices. However, demand for U.S. hard red winter wheat remains subdued. The volatility in wheat prices is influenced by a slow end-of-year news environment and substantial long positions held by traders.

Looking ahead to 2023/24, the U.S. wheat outlook indicates unchanged supplies and domestic use, higher exports (especially in Soft Red Winter wheat to China), and reduced ending stocks. Globally, 2023/24 wheat projections anticipate increased supplies, consumption, and trade, with reduced stocks, primarily influenced by production estimates for Australia, Canada, and Brazil. Ukraine's grain exports for the current marketing season have fallen, but the country is exploring alternative export routes. Despite expectations of a significant harvest, Ukraine may face challenges, potentially resulting in its smallest wheat crop in 12 years.

In Russia, wheat export prices rose due to difficult weather conditions affecting shipments, with ongoing supply issues impacting prices. The country's grain exports, including wheat, have increased, and interventions have begun to stabilize the market. Meanwhile, Egypt's GASC or the General Authority for Supply Commodities resumed buying tenders, purchasing Russian wheat. 

In the futures market, wheat prices rebounded after a selloff, with gains observed in different wheat varieties. U.S. wheat exports saw a notable increase for the week ending December 7, contributing to the accumulated exports reaching 8.6 MMT. The French Agriculture Ministry reported a 5% decrease in winter wheat planting, slightly below the five-year average. Consequently, there might be a rise in wheat prices with a minor correction following sales in this period, but the overall trend is expected to remain relatively stable, trading within a narrow range for the remainder of this year and the early part of the next.

Data for Technical Analysis (1H) CFD US Wheat Futures - Mar 24 (ZWH4)

Resistance : 616.23, 616.75, 617.61

Support : 614.51, 613.99, 613.13

1H Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 613.51 - 614.51 is touched, but the support at 614.51 cannot be broken, the TP may be set around 616.36 and the SL around 613.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 616.23 - 617.23, TP may be set around 618.50 and SL around 614.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 616.23 - 617.23 is touched, but the resistance 616.23 cannot be broken, the TP may be set around 614.12 and the SL around 617.73, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 613.51 - 614.51, TP may be set around 611.85 and SL around 616.73, or up to the risk appetite.       

Pivot Points Dec 13, 2023 12:17PM GMT

Sources: Hellenic Shipping News, Nasdaq