Wheat Market Drops on Profit-Taking, Strong Dollar & Weak Export Demand

The wheat market declined due to profit-taking and technical selling, alongside a stronger U.S. dollar, which made American exports more expensive. The market is also monitoring growing conditions in Europe and the Black Sea region. While Russia's export cap might redirect some demand to the U.S., global supply remains strong due to larger harvests in Argentina and Australia. Traders are also keeping an eye on the potential resolution of the Russia-Ukraine war. Meanwhile, Ukraine's wheat exports have increased compared to the previous year.

The U.S. wheat outlook for 2024/25 anticipates slightly higher domestic use, leading to a reduction in ending stocks. The season-average farm price is stable at $5.55 per bushel. Globally, wheat supply is expected to increase slightly due to higher production in Kazakhstan and Argentina, but trade is projected to decline as China reduces imports to their lowest level in five years. Ending stocks are also expected to decrease, mainly due to reductions in China.

The wheat complex showed gains earlier in the week, with futures rising across all three markets—Chicago SRW, KC HRW, and MPLS spring wheat. However, USDA's latest export inspection report showed a significant weekly decline in U.S. wheat shipments, down 56.2% from the previous week. Mexico and South Korea were the top buyers. Meanwhile, Saudi Arabia purchased 920,000 metric tons of wheat, and Japan issued a tender for wheat from Australia, Canada, and the U.S.

Despite earlier strength, wheat futures ultimately settled lower on Wednesday. Chicago SRW, KC HRW, and MPLS spring wheat futures declined, pulling back from recent highs. Traders reassessed weather-related risks, as cold weather concerns in Russia and the U.S. diminished.

Euronext wheat prices dipped due to weak export demand in Western Europe and a decline in Chicago wheat prices. Traders noted that Romania and Bulgaria remain highly competitive exporters, limiting Western Europe's export prospects. The potential for a peace deal in Ukraine adds uncertainty, as it could significantly boost Russian and Ukrainian exports, further pressuring the EU market. French wheat exports remain sluggish, struggling to compete for sales to Morocco.

The European Union's wheat exports have dropped sharply, down 36% from the previous year. Romania leads EU exports, followed by Lithuania and Latvia. Nigeria remains the top destination for EU wheat, followed by Morocco, the UK, Algeria, and Egypt. Meanwhile, Jordan has issued an international tender for up to 120,000 metric tons of wheat after failing to secure a purchase in its previous tender.

Technical indicators suggest that wheat prices may still have room to rise, with potential targets at $623.70 and $648.40 per metric ton. However, market volatility remains high due to shifting supply and demand dynamics, weather risks, and geopolitical developments.

Data for Technical Analysis (1W) CFD US Wheat Futures - Mar 25 (ZWH5)

Resistance : 603.36, 610.73, 622.67

Support : 579.48, 572.11, 560.17

1W Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 559.48 - 579.48 is touched, but the support at 579.48 cannot be broken, the TP may be set around 611.34 and the SL around 549.48, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 603.36 - 623.36, TP may be set around 642.00 and SL around 569.48, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 603.36 - 623.36 is touched, but the resistance 603.36 cannot be broken, the TP may be set around 579.48 and the SL around 633.36, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 559.48 - 579.48, TP may be set around 548.90 and SL around 613.36, or up to the risk appetite.       

Pivot Points Feb 20, 2025 02:07AM GMT