Wheat Prices Surge Globally Amid Weather Woes and Crop Concerns

Wheat prices in Russia and Canada have risen due to adverse weather conditions and concerns over crop damage in the Black Sea region. Russian wheat has seen a significant price increase, with forecasts for production cut due to frost damage. Since early May, cold weather followed by frosts in Russia has severely damaged wheat crops, reducing production estimates for the 2024-25 marketing year. The northern and western parts of Europe, including Italy, France, and Germany, have also been affected by heavy rainfall and storms, posing risks to both winter crops and spring crop planting. Additionally, dry weather forecasted for the next two weeks in Ukraine is likely to reduce wheat production there.

The USDA projects higher U.S. wheat supplies and exports for 2024/25, despite a projected global stock decrease. The outlook for U.S. wheat includes larger supplies, modestly higher domestic use, increased exports, and higher stocks, with production expected to rise 3% from last year. However, global wheat stocks are expected to decrease due to lower carry-in stocks in several countries, despite record production levels.

Russia's wheat harvest forecast was cut by IKAR to 83.5 million metric tons, a third downgrade this month, yet still an above-average crop. This cut reflects lower production forecasts, leading many firms to reduce their export projections for Russia. Ukraine's crops faced dryness and frost, raising concerns despite state forecasts indicating minimal damage.

Tunisia's state grains agency is evaluating wheat purchase offers amid these price fluctuations. The agency is considering offers to purchase around 100,000 metric tons of soft wheat, with offers still under consideration, and no purchase has been reported yet.

Chicago wheat futures hit their highest level since last July on Wednesday but ended with losses. Adverse weather conditions led to further downgrades of Russian harvest estimates, raising prices by 18% this month and influencing livestock feed choices globally. This shift is expected to reduce global wheat use as animal feed by about 5%. Concerns over potential crop damage in Ukraine and declining U.S. crop condition ratings also supported prices. Rainfall is needed in Australia to ensure a good crop, which could further influence prices.

The most active Euronext September wheat contract rose to 264.50 euros per metric ton, the highest level since February last year. Non-commercial market participants increased their net long positions in Euronext's milling wheat futures and options to 108,106 contracts from 79,302, while commercial participants extended their net short positions to 114,263 contracts from 85,634.

As wheat prices closed positively yesterday, surpassing the $701.10 level and ending the day above it, today, prices began with a bullish rally, continuing to rise within the upward channel on the chart. The goal is to achieve further gains in upcoming sessions, with targets at $720.00 and potentially extending to $746.00 after surpassing the current level. Therefore, a bullish trend is expected in the coming sessions. However, if the price falls below $701.10, this rise may be halted, leading to a potential decline on an intraday basis. The expected trading range for this period is between the support at $710.00 and the resistance at $725.00.

Data for Technical Analysis (1H) CFD US Wheat Futures - Jul 24 (ZWN4)

Resistance : 694.17, 694.83, 695.90

Support : 692.03, 691.37, 690.30           

1H Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 690.03 - 692.03 is touched, but the support at 692.03 cannot be broken, the TP may be set around 694.60 and the SL around 659.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 694.17 - 696.17, TP may be set around 699.40 and SL around 691.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 694.17 - 696.17 is touched, but the resistance 694.17 cannot be broken, the TP may be set around 691.80 and the SL around 697.20, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 690.03 - 692.03, TP may be set around 686.00 and SL around 695.20, or up to the risk appetite.       

Pivot Points May 23, 2024 03:18AM GMT