Mixed Wheat Market Trends Amid U.S. Production Increases and Black Sea Competition

The wheat market had mixed results. Chicago and Kansas City saw decreases due to an increase in U.S. winter wheat production both monthly and annually. In contrast, Minneapolis experienced a rise in prices despite a reduced spring wheat estimate, owing to record yield predictions that might decrease due to adverse conditions in the northern U.S. Plains and Canada. The USDA revised global wheat production upward for Australia and Ukraine, counterbalancing reductions in the U.S. and E.U., and also raised export expectations for these two countries. Wheat export inspections increased from the previous week and the previous year, with Brazil and the Philippines leading the buyers.

For 2024/25, the U.S. wheat outlook predicts lower supplies, slightly higher domestic use, unchanged exports, and reduced ending stocks. Production dropped by 26 million bushels to 1,982 million due to a decrease in harvested area, partly offset by higher yields. The harvested area was reduced by 0.9 million acres to 37.9 million, with an average yield increase to 52.2 bushels per acre. Production of Hard Red Spring, Durum, and Soft Red Winter wheat decreased, while Hard Red Winter and White wheat production increased. Domestic use increased by 2 million bushels, primarily for food use based on the latest NASS Flour Millings Products report. Projected ending stocks for 2024/25 fell by 28 million bushels to 828 million, with the season-average farm price stable at $5.70 per bushel.

Globally, wheat supplies are projected to rise by 3.5 million tons to 1,060.6 million, with increased production in Ukraine, Kazakhstan, and Australia offsetting reductions in the EU and the U.S. Ukraine's production was raised due to larger-than-expected harvested areas, and Kazakhstan's due to higher yields from good rainfall. EU production is down by 2.0 million tons to 128.0 million, the lowest since 2020/21, due to heavy rainfall in France affecting quality and yield. Global consumption is forecast to rise by 4.1 million tons to a record 804.0 million, driven by higher feed and residual use in the EU, Kazakhstan, and Ukraine. World trade is expected to increase by 2.0 million tons to 214.9 million, mainly due to higher exports from Australia and Ukraine. Projected global ending stocks for 2024/25 are slightly reduced by 0.6 million tons to 256.6 million, the lowest since 2015/16.

The USDA increased its wheat harvest forecast for Ukraine by 10.8% to 21.6 million tons for the 2024/2025 marketing year and raised export expectations by 7.7% to 14 million tons. Domestic consumption is projected to rise by 10.5% to 7.4 million tons. Starting reserves are lower than the previous month but are expected to increase by the end of the marketing year.

EU soft wheat exports for the 2024/25 season are at 3.09 million tons, lower than the previous year’s 3.96 million tons. EU wheat exports are projected to be at their lowest in three years due to a smaller wheat crop and reduced carry-in stocks. France’s wheat production is notably down 20%, the lowest in nearly four decades, leading to higher wheat prices. The EU will likely lose market share to other suppliers, including Russia, Ukraine, Canada, and the U.S., in key markets.

Egypt’s General Authority for Supply Commodities (GASC) is negotiating to buy up to 1.8 million metric tons of wheat, primarily from Russia. This follows a smaller-than-expected purchase in an earlier tender due to delayed payment terms. Price discussions for the direct negotiations are ongoing.

Kazakhstan and Türkiye have signed agreements to boost agricultural exports, including a deal to export 250,000 tons of wheat. These agreements aim to enhance Kazakhstani farmers' access to international markets and attract investments in agricultural processing in Kazakhstan.

Wheat prices declined due to competition from cheaper Black Sea supplies and a modest Egyptian purchase. Chicago Board of Trade wheat futures fell due to this competition.

Euronext wheat futures fell for the second consecutive day as Egypt's efforts to secure supply highlighted cheaper Black Sea wheat availability. December wheat on Euronext fell by 0.9%. A stronger euro also pressured Euronext wheat. EU wheat exports are down 22% from last year. The USDA's crop report provided some support to wheat futures, but abundant Black Sea wheat eased production concerns in other countries like France and Germany.

Wheat prices started to decline after reaching the $566.00 area, indicating a potential return to a bearish trend. A bearish bias is expected for this period, but if prices breach $557.50, this decline could halt and prices may recover, potentially testing the $578.40 level. The anticipated trading range for this period is between $535.00 support and $560.00 resistance.

Data for Technical Analysis (15Min) CFD US Wheat Futures - Sep 24 (ZWU4)

Resistance : 525.96, 526.08, 526.27

Support : 525.58, 525.46, 525.27  

15Min Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 524.58 - 525.58 is touched, but the support at 525.58 cannot be broken, the TP may be set around 526.04 and the SL around 524.08, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 525.96 - 526.96, TP may be set around 527.40 and SL around 525.08, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 525.96 - 526.96 is touched, but the resistance 525.96 cannot be broken, the TP may be set around 525.54 and the SL around 527.46, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 524.58 - 525.58, TP may be set around 524.20 and SL around 526.46, or up to the risk appetite.       

Pivot Points Aug 14, 2024 02:59AM GMT