Wheat Futures Prices Pull Back with U.S. Priced Out of Key Global Markets 

Wheat prices slumped or the third straight session on Friday, down 2.5% to 3.25%. Selling came after the spike higher earlier in the week with India banning wheat exports. The move lower triggered by profit-taking triggered additional CTA technical selling and growing concerns American wheat is priced out of some key global markets right now.

Wheat

Wheat Futures Highlights

  • Wheat surged 6.2% on the week and is up 53% ytd
  • On Friday July Chicago SRW futures dropped 30 cents to $11.7050, July Kansas City HRW futures lost 39 cents to $12.5625, and July MGEX spring wheat futures tumbled 44.5 cents to $12.86.
  • Preliminary volume estimates were for 68,128 CBOT contracts, spilling moderately below Thursday’s final count of 88,327.

Wheat Technical Outlook

KnovaWave analyze the WEAT ETF as a surrogate to Wheat given its high beta relationship and more liquid aspect as an investment vehicle.

WEAT broke the large pennant after it spat 8/8, and the minimum target. We have completed a measured 4/8 correction off highs meaning key support as that base, the 50dma and the pennant confluence.

WEAT ETF Weekly Chart via KnovaWave

“Farmers are in a race against the clock to get their crops in the ground this week, with planting of corn, soybeans and wheat well behind their usual pace. Wet and cool temperatures in key parts of the Midwest have delayed farmers’ planting plans, leaving them days to get crops in the ground before they start to lose out on a bigger harvest. If they don’t, some grain traders say that already high prices for agricultural commodities could rise even more… The U.S. Department of Agriculture said 22% of corn was planted, compared with 50% for the previous-five-year average. For soybeans, 12% was planted, compared with the previous-five-year average of 24%, and 27% of spring wheat was in the ground compared with a typical 47%…”

May 11 – Wall Street Journal (Patrick Thomas and and Kurk Maltais):

Wheat Quality Council tour of Kansas

The Wheat Quality Council tour of Kansas was held this week. The final state-wide average yield came in at 39.7 bushels per acre versus USDA’s May 12th estimation of 39.0 bpa and the most recent 5-year average at 47.4 bpa. While the yield came in higher than the latest forecasts, total production came in 10 million bushels below USDA’s figures due to abandonment.

The tour sees Kansas harvested acres at 88.8 percent of those planted versus the USDA’s forecast of 93.9 percent the 4-year average of 94.9 percent. With Kansas condition ratings at 54 percent Poor-to-Very Poor, the 39.7 bpa was higher than I was expecting.

France

French soft wheat conditions continue to deteriorate amid hot, dry weather in recent weeks. Farm office FranceAgriMer reports that 73% of the 2021/22 crop is now rated in good-to-excellent condition through May 16, down nine points from a week ago. Another 18% of the crop is rated fair, with the remaining 8% rated poor or very poor.

Egypt Wheat Imports

Egypt is the world’s top wheat importer and sources a large percentage of its supplies through Ukraine.

Cargoes totaling 11 million bushels of Ukrainian wheat bound for Egypt remain stranded at port, with deliveries originally intended in February and March. Egypt’s supply minister noted that an extension for delivery has been granted amid discussions that the grain might be shipped via rail through Poland instead. On Wednesday there was news the UN is working to get Ukraine’s sea ports exporting grain again.

Commodity Round Up

  • Bloomberg Commodities Index declined 1.6% (up 29.4% y-t-d).
  • Spot Gold fell 3.8% to $1,812 (down 1.0%).
  • Silver sank 5.6% to $21.11 (down 9.4%).
  • WTI crude increased 72 cents to $110.49 (up 69%).
  • Gasoline jumped 5.3% (up 78%),
  • Natural Gas fell 4.7% (up 105%).
  • Copper dropped 2.2% (down 7%).
  • Wheat surged 6.2% (up 53%),
  • Corn slipped 0.4% (up 32%).
  • Bitcoin sank $6,300, or 17.4%, this week to $29,800 (down 36%).

Risk markets continue to respond to the war in Ukraine and the supply crisis from the Coronavirus outbreak and lockdowns.

Source: TC, USDA, Farm Progress

From The TradersCommunity Research Desk