Wheat Market Gains on Speculation of Ukrainian Export Limits and Lower Russian Output

The wheat market has been strengthened by a combination of fund and technical buying, with prices for wheat showing signs of being slightly oversold. There is speculation that Ukraine might impose limits on its wheat exports for the 2024/25 season. Such restrictions, along with anticipated smaller wheat crops in Russia and Europe, could increase demand for U.S. wheat, which is currently on a faster export pace compared to the previous year.

SovEcon has revised its forecast for Russia's wheat production downward to 82.5 million tons due to lower-than-expected yields in certain regions. Additionally, there are emerging concerns about Argentina's wheat production, although recent updates from the Buenos Aires Grain Exchange indicate that 44% of the crop is in good to excellent condition, up from 39% the previous week, despite ongoing dry conditions in some areas.

In the U.S., the wheat harvest is progressing normally. The USDA reports that 70% of the spring wheat crop has been harvested and 2% of winter wheat has been planted, both of which are in line with typical progress for this time of year. U.S. wheat export inspections are currently ahead of the required pace to meet USDA projections, with Mexico and the Philippines being the leading destinations.

Russian wheat exports for September are expected to fall slightly compared to last year, from 5.5 million tons in September 2023 to a projected 5.1-5.2 million tons this September. This forecast is consistent with the August estimate of 5.2 million tons, which was adjusted upward due to increased shipments from deep-water ports in the south, despite a halt in shipments to Kazakhstan following an import ban. The export prices for Russian wheat remain stable at $216 per ton, though quality issues due to poor harvesting conditions in Siberia are affecting the market.

Ukraine's farm ministry has agreed to cap wheat exports for the 2024/25 season at 16.2 million metric tons. This decision comes as wheat exports had already reached 3.59 million tons by August 30, significantly higher than 1.06 million tons by the same date in 2023. The ministry projects a smaller wheat crop of 21.8 million tons this year, down from over 22 million tons in 2023.

Jordan has issued a tender to purchase up to 120,000 metric tons of milling wheat from various sources, with bids due by September 12. The wheat is to be delivered in January and February 2025. Meanwhile, Turkey has significantly reduced its wheat imports, falling from $144 million in July 2023 to just $20 million this year.

Egypt remains a top buyer of Russian wheat, purchasing 1.244 million tons from July to August 2024. Bangladesh and Turkey follow as significant buyers. Kazakhstan, facing railroad capacity issues, has seen an increase in wheat exports to Europe and China. The country's wheat harvest is projected at 16 million tons, with exports expected to reach 10 million tons. Efforts are being made to expand elevator capacity and improve logistics to address transportation challenges.

Japan's Ministry of Agriculture, Forestry, and Fisheries is seeking to buy 87,660 metric tons of wheat from the U.S. and Canada in a regular tender closing on Thursday. Japan, a major wheat importer, controls its purchases through frequent tenders, ensuring a steady supply for its milling needs.

Crop difficulties in the European Union, notably the poorest French wheat harvest since the 1980s, led to a 4.5% increase in wheat prices last week. Despite this, global production prospects remain strong. According to the Australian agriculture ministry, higher wheat outputs are anticipated in Canada, Argentina, Australia, and the U.S., which should counterbalance lower production expected in Russia, the European Union, and Ukraine. The ministry has also raised its wheat production forecast for Australia by 2.7 million metric tons.

Argentina's corn planting area for the 2024/25 season is predicted to decline by 17.1% due to concerns about pests and drought, although recent rainfall may benefit the planted crops.

In the UK, spot wheat prices are around £180 per ton, with November futures at their lowest since March. Wheat stocks in the UK have risen significantly, with merchants, ports, and co-operatives holding 44% more wheat compared to the previous year, totaling 771,000 tons, and on-farm stocks in England and Wales are 35% higher than last year.

Chicago wheat futures fell on Tuesday, ending a streak of four consecutive days of gains driven by poor European harvests. The drop was attributed to renewed concerns over abundant global wheat supplies and competition from cheaper Black Sea grain, keeping prices near their lowest since 2020.

The USDA reported strong wheat export inspections for the week ending August 29, with 577,944 metric tons shipped, surpassing expectations. The total marketing year shipments are up 31.92% from the previous year. The Commitment of Traders report revealed an increase in speculative short positions for CBT wheat and a reduction in KC wheat shorts.

Wheat prices are currently trending within an intraday bullish channel, with the next target set at $564.60. The positive outlook remains intact as long as prices stay above the EMA50, which supports the ongoing rise. A decline could begin if prices fall below $547.50, potentially leading to further drops, starting with a test of the $532.00 area. For this period, the expected trading range is between $540.00 (support) and $560.00 (resistance).

Data for Technical Analysis (15Min) CFD US Wheat Futures - Dec 24 (ZWZ4)

Resistance : 566.13, 566.55, 567.21

Support : 564.81, 564.39, 563.73

15Min Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 563.81 - 564.81 is touched, but the support at 564.81 cannot be broken, the TP may be set around 566.13 and the SL around 563.31, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 566.13 - 567.13, TP may be set around 569.00 and SL around 564.31, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 566.13 - 567.13 is touched, but the resistance 566.13 cannot be broken, the TP may be set around 564.32 and the SL around 567.63, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 563.81 - 564.81, TP may be set around 562.30 and SL around 566.63, or up to the risk appetite.       

Pivot Points Sep 4, 2024 08:47AM GMT