Wheat Market Mixed; Optimism for 2024 Harvest

The wheat market exhibits a mixed performance, influenced by various factors. Wheat prices are consolidating ahead of upcoming USDA numbers and anticipated precipitation in the Plains and Midwest later in the week. Export sales are expected to reflect the sluggish global demand for U.S. wheat, and there's a possibility of China canceling previously purchased U.S. soft red winter wheat in favor of cheaper alternatives. Russia's lower prices enhance its leverage in global wheat business.

The 2024 U.S. winter wheat crop is expected to emerge in better condition than the previous year due to improved precipitation in key growing areas. However, rising temperatures and melting snow cover could pose a risk of winterkill if a potential cold snap occurs later in the month. The U.S. has faced drought in major wheat-growing regions in recent years, leading to a 6% decline in the 2023/24 wheat production compared to the pre-drought five-year average.

As the focus shifts to the 2024 harvest, early optimism arises, driven by expectations of improved yield and reduced abandonment despite decreased acreage. This optimism is anticipated to boost U.S. wheat production, easing pressure on the balance sheet and prices. Monthly wheat exports for December show a 12% increase, reaching 54.95 million bushels, contributing to a season total of 370.3 million bushels through December.

Argentina's 2023-24 wheat production exceeds original expectations, reaching 15.4 million tonnes, 2.6% higher than the USDA estimate. The report from the Foreign Agricultural Service (FAS) notes improved yields, although damage from winter drought and late frosts can now be assessed. Consumption in Argentina is estimated at 6.9 million tonnes, with a 5% increase in wheat milling. Exports for 2023-24 are projected to rebound significantly to 10.2 million tonnes.

The Russian export tax has increased by nearly 5%, and Ukrainian sea exports, particularly from the Odesa port, have remained robust. The Ukrainian sea exports from Odesa port reach over 20 MMT since August. Japan issues a weekly tender seeking 136,000 MT of wheat from the U.S., Canada, and Australia.

Chicago Board of Trade wheat futures close higher on Wednesday, driven by technical buying and positioning ahead of key government crop data reports. Supply pressure persists due to a large surplus in Russia and favorable prospects for the upcoming harvest. CBOT March soft red winter wheat settles 7 cents higher at $6.02 per bushel. Attention turns to Thursday's data releases, including Statistics Canada's grain stocks estimates and the USDA's U.S. and world supply and demand forecasts.

Technical analysis suggests a bearish bias for wheat prices, with negative pressure from the EMA50 against intraday trades. The expected trading range for the day is between 585.00 support and 605.00 resistance, with a breach of 605.00 potentially halting the expected decline and leading to a reversal.

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

Resistance : 600.92, 601.69, 602.93

Support : 598.44, 597.67, 596.43                              

1H Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 597.94 - 598.44 is touched, but the support at 598.44 cannot be broken, the TP may be set around 601.11 and the SL around 597.69, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 600.92 - 601.42, TP may be set around 604.20 and SL around 598.19, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 600.92 - 601.42 is touched, but the resistance 600.92 cannot be broken, the TP may be set around 597.86 and the SL around 601.67, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 597.94 - 598.44, TP may be set around 594.60 and SL around 600.67, or up to the risk appetite.       

Pivot Points Feb 8, 2024 02:45AM GMT