Market Bullets® Tuesday, July 22, 2025: AM
It was a choppy Monday session, after Friday's surprising rally. As of very early Tuesday morning the market was near unchanged. The market is still searching for its footing after failing to clear Friday's highs. It's almost as if the market took a big gulp of air on Friday, and now it's exhaling cautiously.
If you want to see reality in a bigger picture, take a look at the monthly chart for Chicago Soft Red Winter (SRW) wheat. We are seeing a lack of conviction for a sustained upward trend. The bulls need to show they can hold onto gains and break above recent resistance levels to truly ignite a rally. Otherwise, we could be looking at a range-bound market for some time to come as harvest presses forward into the last 25% for the season.
The International Grains Council (IGC) is holding its 2025/26 world wheat crop outlook at 808 million metric tons (MMT), a slight increase from the prior season. However, they stil show slightly below projected consumption of 814 million metric tonnes.The implied tightening of global stocks has helped sustain the hope of many producers and theoretically should be supportive of PRICES.
But consider those Black Sea Blues (and Reds): Russia remains the big gorilla in the export room, with expectations of 84-85 million tonnes of production and ample export availability. Sanctions have forced them to price aggressively and a firm Ruble has continued to add pressure. The Russians will sell no matter what price regime they must face, and global buyers shrug their shoulders and grin, knowing that as long as the sanctions are in place, wheat will be cheap. The general effect on the price of wheat is negative.
Meanwhile, Ukraine's crop is projected lower due to subpar yields in southern regions, leading to some premiums for prompt shipments. They also will sell no matter what the price. Holding back exportable wheat does not serve them as well as some cash flow.
The question we might not want the answer to before breakfast... Where Do We Go From Here?" From a technical standpoint, the market is currently in a "wait and see" pattern. The rally on Friday was a nice pop, but subsequent sloppy behavior suggests it was more of a short-covering bounce than any fundamental shift in trend. Watch the recent lows closely for support. If we break below them, we could see further downside. On the upside, Friday's highs are the immediate resistance to overcome. A clear break and sustained trade above those levels would signal a potential shift in momentum...but it remains, “Wait and See”.
For now, the overall trend for wheat remains sideways.
EXTRA
* Spring Wheat Tour Kicks Off! The 2025 US Wheat Quality Council's Hard Spring Wheat and Durum Tour starts today, Tuesday, July 22nd. These tours always attract attention, as it is as natural to walk out into a field and some informal “had thrashing” and bite a few kernals. These guys are serious counters, though. Keep your ear-buds peeled for early yield and quality reports, as these can definitely move the needle.
* Heatwave Watch: There's a high-pressure ridge expected in the central U.S. over the next couple of weeks. While not expected to be catastrophic for most summer crops, it bears watching, particularly for areas in the central and southern Plains. Heat is the last remaining wildcard!
Stay tuned. The most positive item in the lineup is that we have not seen any break to new lows for months.
Market Bullets® Monday, July 21, 2025: Pre-Dawn
The wheat price complex jumped up Friday, overcoming a deficit to finish with a net unchanged-to-slightly-higher week except for Minneapolis Hard Red Spring (HRS), which has trimmed off 60 cents in the last 4 weeks, mostly on improving crop condition prospects. Chicago September contracts reverted right back to the 59-day statistical mean price line, which shows a gentle upward slope since the lows at the end of March, and has gained a whopping 20 cents in that time.
At this point Chicago (our most liquid bellwether contract) is about 31 cents below the 69-day high of $5.75, and 39 cents above the low of $5.05 for the period. These boundaries of the range are functioning as trip-wire alarms for new trend moves.
Friday’s price-pop relieved some producer anxiety and likely triggered some harvest cash flow sales, as northern hemisphere combines are well past halfway through this season’s crop.
Bangladesh has agreed to buy 700,000 metric tonne of wheat per year as part of a tariff abatement deal signed Sunday, July 20. U.S. Wheat Associates facilitated the Memorandum of Understanding with the Bangladeshi Ministry of Food.
Diesel spiked 12 cents/gallon on Friday, July 18th to its highest since June 23, and then quickly reversed, to close slightly negative for the day. The jump came on the heels of an announcement of fresh European Union sanctions on Russia, including squeezing the EU Member price cap on Russian oil from $60 down to $47.60 per barrel and targeting the operators of the "shadow fleet" of oil tankers that enable Russian sales and deliveries of crude and refined products into the global markets, significantly India and China. The new week opened Sunday night with no immediate rebound or pullback.
The U.S. Dollar Index has paused its 26-week downward trend. The Index has gained 1.62% for July month-to-date, but at 98.160 remains well below its January peak at 110.010. The impact on U.S. grain sales has been positive, contributing to the 25-million-bushel increase in total forecast exports for this crop year in the July World Ag Supply/Demand Estimates (WASDE) report on the 11th.
Sunday PM wheat trade was very quiet, a couple of cents on either side of unchanged at 9:30 PM Pacific Daylight Time (UTC-7.
The 60-day trend line is positive (if you squint a little and back away from the desk). Motivational wheat price factors are dormant or too far away to be felt at the moment, but there is a slow-growing idea that a post-harvest rally would be appropriate.
Stay tuned.
Market Bullets® Friday, July 18, 2025: Pre-Dawn
With all of the hyperbolic press, wars in the Middle East and Ukraine, along with the amazing changes occurring within the borders of our home, the markets seem complacent. There are very few noticeable changes in the prominent futures contracts. Copper has responded to the demand of “Data Center” construction ordered by the Ai for its personal growth. This is a key story to monitor, as it affects power generation and usage as well. “Personal Modular Molten Salt - PMMS Reactor – Order Yours Today!”
Crude oil inventories are about 8% below the five-year average. Diesel inventories are about 21% below the five-year average for this time of year.
In this jaded, politics-weary, but still hard-working environment, wheat is a small factor, but people must eat, and bread remains popular among the hungry.
The problem for those of us who make and sell wheat for a living is that relatively high prices in recent years made wheat growing popular all over the world. As one example, there was a time when India was always a hungry importer of wheat. Today they often are a net exporter. Another example; Russian collective farms were never productive, often forcing the hardy folk there to buy wheat from the U.S.. Today they are easily the number one exporter of wheat in the world market. (the oligarchs have figured out how to grow wheat). So there is a diversified global wheat production capacity. In the end, as ag ground finds alternatives to less-profitable wheat, the most efficient producer that brings the most attractive product to the market will win. The wheat acres in the U.S. have declined about 48% since 1981, mostly due to alternative crops being more profitable. What remains is the most efficient wheat growing ground, but with fewer alternatives than other regions. For wheat producers in these places, efficient marketing has never been more important.
The price of wheat is in a long-term flat pattern, hovering at or near break-even for many producers, especially those who operate with a significantly leveraged balance sheet. A 3%-7% difference in the average sale of wheat during a year can be the difference between a good year and a bad one. ‘Nuff said!
Wheat sales reported for this week: 494,400 tonnes. Buyers included Mexico (84k), Venezuela (72k), South Africa (52k), Japan (49k), Peru (47k), Panama (34k), Unknown (34k), Ecuador (30k), and South Korea (27k).
Sales by wheat class:
· HRW: 327,700 metric tonnes (12,040,910 bushels)
· SRW: 101,000 tonnes (3,711,113 bushels)
· HRS: 56,000 tonnes (2,057,647 bushels)
· White: 9,800 tonnes (360,088 bushels)
ISW July 17, 2025: “Russia’s Central Bank continues efforts to maintain the facade of domestic economic stability by pursuing economic policies that will likely exacerbate Russia’s economic instability.”
Friday morning very early trade has Chicago wheat up 9 cents. It looks like the trade has concerns heading into the weekend, although its corn and beans that are vulnerable to the heat. Or maybe, just maybe there is a whiff of a Chinese trade settlement in the air. You can’t reasonably buy this stuff, but it surely does look nice on the charts. The futures market does not trade the present. That’s why they call it “futures”. That sometimes requires that the market is looking into the future, and it collectively knows more than we do individually. Watch those charts!
Stay tuned.
Market Bullets® Tuesday, April 30, 2024 Early AM
There are a few major pillars of the accelerated move upward of the last couple of weeks. Some of the most noticeable are:
The Red Sea is the pressure point for large amounts of shipping that must pass through the Suez Canal when originated from the Black Sea through the Mediterranean intended for customers in Asia. This pinch point will come into play if attacks on shipping in the Red Sea intensify, causing delays and rising costs to end users of wheat. The market is well aware of this potential for trade disruption, but conditions could shift rapidly.
USDA’s Crop Progress report as of April 28, 2024 shows Kansas winter wheat condition at 31% Poor-to-Very Poor (PVP) versus last year same week 62%. Oklahoma PVP 14% VS 63% LY, and Colorado 23% VS 39% LY. Of these leading Hard Red Winter (HRW) states, Kansas has seen its Good-to-Excellent category slip 18 points from 49% on April 27th to 31% this week. This is one of the pillars of the swift rally that may yet be extended if this weather trend continues.
There is increasing pressure on China to reduce their massive investments in U.S. Treasury bonds. The effect of large liquidations of Treasuries into the global markets is to push bond prices lower, hence interest rates higher. This is not considered “emergent” but it colors the background of a market into which the U.S. government must aggressively sell bonds over the next few months and years to sustain coverage of budget deficit spending, even as a major buyer is pushing back from the table.
Tuesday is the last trading day of April. Funds tend to be more sensitive to month-end, as their “booked trades” affect their track record and sometimes their paychecks. Covering (buying back) some of their now-eroding profitable short sales of recent weeks seems likely to continue unless one or more of the pillars of the dramatic upward move of the last 8-9 trading sessions abates. Technical retracements of such swift and significant moves are normal, so we may be able to establish some measuring points on Tuesday. The trend is upward, with a mean line around $5.97 in Chicago, only 5-6 cents below the pre-dawn trade of Tuesday morning, as the market has pulled back 30 cents from the highs of last Friday.
The drama is not over yet. This is a good time to be watching and measuring the general tone of wheat prices. The charts are positive.
Stay tuned. Good hunting.
Market Bullets® Monday, April 29, 2024 Early AM
The week just ended produced the most powerful, un-interrupted, upward shot in wheat prices since the end of November and the first week of December 2023. Northern hemisphere leader was Paris milling wheat futures at the equivalent of plus-84 cents, with KC Hard Red Winter (HRW) close behind at plus-69. Minneapolis Hard Red Spring sprang up 56, while Chicago gained 55. All of this pulled the sleepy PNW soft white wheat coast bids up 35 cents.
There was no single event or headline that produced this healthy blast. The most prominent factor is declining crop conditions in a wide variety of locations, with Kansas and Oklahoma as poster children along with several other producing areas including Russia, France and India reporting reduced expectations mostly due to dry weather conditions. Excessive moisture has been reported this season (China), but that kind of problem is generally preferred to drought. Marginally shrinking crop projections is not enough alone to support the magnitude of the price move.
Russian military planners have been acutely aware of delays in U.S. Congress in support of Ukraine’s efforts and have turned up the heat to try to capture as much ground as they can ahead of deliveries of U.S. weapons and supplies to the front lines in Eastern Ukraine. The disruption in export loading, and anticipated logistical problems as a result suggest a slowing of Ukrainian wheat, corn and sunseed oil movement into global channels.
The chart buy-signals were the first vigorous flashing lights we have seen in so long that it was a little unfamiliar, so inertia may have delayed some money movement. The big speculative funds did some short covering, buying back previously sold futures in relatively large orders, but they did not reduce the total shorts by enough to call that factor completed. The market has been suffering from a one-sided message so some players may have been caught off-guard. There are new technical patterns to absorb and calibrate. Now there is sure to be some pent-up cash wheat movement out of the country that will probably serve to slow the momentum of this rally. There is still quite a bit of old-crop wheat yet to be sold, at least in the U.S.
The Chicago price is well above the Box-o-Rox 60-session moving average, which has the board reading, “delay incremental sales”. This is a crude signal, but the general idea is to be patient with sales when the trend is in our favor. At this point, it would take a movement of the front-month contract back below $5.75, about 45 cents below pre-dawn trading this morning to shift back to, “Sell or get current on plan sales”. BoR is not intended to be a trading vehicle, so it should not be burdened as competition with the many superior “systems” that exist. It is only a simple indicator that encourages “speed-up” or “slow-down” as it fits an already constructed marketing plan.
Please note that MarketBullets, LLC is not a trading advisor, and what we publish here is plain observation and basic reasoning. The entire responsibility for trade action by our readers must be well understood to be their own and no one else's We have never seen any “system” that is always correct and never has poor performance periods. Perhaps the “AI” will prove to be the source of a perfect trading vehicle, but it seems to us that the market takes account of such things all by itself, making that perfection fleeting and unreliable in the end. We believe that the “AI” will never catch a trout on a fly.
This stuff is trackable. Let’s track it!
Market Bullets® Friday, April 26, 2024 Early AM
Statistics continue to accumulate showing shrinking crop estimates around the globe.
The weekly wheat export sales report showed old crop at 82,035 metric tonnes for the week of April 18, a 4-week high. 72,200 tonnes were switched from unknown to China. New crop sales were 371,853 tonnes exceeding most pre-report trade estimates. The buyers have noticed a change in trend.
Thursday gave us Chicago contracts adding 7 to 8 cents to the total of 71 cents up in the last 5 sessions. MPLS spring wheat gained 10½ cents Thursday. KC HRW moved up 11 cents on new indications of drought in Kansas and Oklahoma. Friday morning had Chicago off 1-2 cents at 2:20 AM Pacific Time, KC was flat and Mpls was down 1½. Volume low heading into Friday with expectations for some profit-taking (Selling short-term gains) going into the weekend.
There is increasing global attention on wheat prices, some from end-users and an expanding number of regular wire articles.
The trend is upward.
Stay tuned.
Market Bullets® Thursday, April 25, 2024 Early AM
Paris milling wheat futures gained the equivalent of $.55 per bushel on Wednesday. Prices broke out of a 32-session channel to the upside on Monday and now have accelerated toward the 61.8% retracement level after blowing the doors off of the 38% retracement of the entire downward move that started in July 2023. The impulsive nature of the move portrays a surge of capital, at least a short-covering squeeze, and possibly a move to acquire wheat deliverables in the future against stress emerging in Ukraine. Now that the replenishment of war supplies has been financed and delivery is expected post-haste, the Ukrainian troops (now an average age on the line of 43 years) have shown a burst of enthusiasm without having to parse the ammunition. The pace and heat of the battle is increasing by the hour. Monday April 22 was the largest single upward trading session in Paris since the one on the same July ‘23 date that printed that measuring high, and Wednesday provided another powerful thrust. Paris is leading the global wheat complex to the upside, although extreme price volatility is not a market-sustaining factor. Crazy price swings are a self-curing problem, as many market participants cannot manage positions due to limited risk capacity (funding). The trend has shifted violently upward.
Chicago is up 6-9 cents just after 2:30 AM Pacific Time, KC up 4 and Mpls up 5. Corn is flat and beans are down a nickel. PNW white wheat coast bids were up to $6.10 going home Wednesday evening, up 40 cents since last Wednesday, June April 17.
Outside of the Ukrainian renewal of war energy, the weather is not being kind to Kansas and Oklahoma, with earlier forecasts for moisture coming short. Every day of warm temperatures in the HRW regions affected will reduce production from now on. Russia also is seeing heat stress and the beginning of crop losses. India is potentially going to have to import 2-4 million metric tonnes of wheat for the first time in some years.
The sharp upward slant on the last week of trade in the wheat complex is probably triggering some long-anticipated fund short-covering as well. We will not see the figures that would prove this theory until the next Commodity Futures Trading Commission’s Commitment of Traders (CoT) report to be released Friday after the close of trade, but the pattern is typical of such an event. The month-end book closing is hard upon us, another reason to expect some fund action given profitable positions dating back some weeks.
Volatility is jumping, making options more expensive in general, so if you are interested in using this marketing tool, it is well to remember that costs are rising (unless you are an option seller, but this means higher implied risk as well). Call your merchant and see if cash wheat is moving in your local area. There have been pent-up sales accumulating that will hit the market now.
This is early in the season. Now it gets more interesting and more difficult at the same time. The trend is up. Try to be patient.
Stay tuned. Good hunting!
Market Bullets® Wednesday, April 24, 2024 Early AM
We have a small pause in the upward move. Chicago’s Wednesday AM small hours has July futures down a nickel, KC down 3½, and Mpls down 2-4 cents per bushel. Not a deal breaker but more like a gut-check. There is no crop disaster looming, and the market is accustomed to a certain amount of war-fog. The risk has certainly been shifting, as northern hemisphere wheat production is by no means a given at this point, with some dry spots and some possible disruptions in international shipping.
The short-term trend base building is proceeding normally. This season is not likely to see a straight-line to high prices.
The funds are watching closely, but have not shown any stress-buying yet. Importers are also measuring their buying plans, but have yet to extend. As always there is still potential price upside, but the present up-leg will retrace at some point, which actually is a more healthy kind of market.
Stay tuned. At least there is something to look at.
Market Bullets® Tuesday, April 23, 2024 Early AM
Monday’s main wheat trading session produced a very powerful upward shot, with Paris milling wheat in a leadership position showing an equivalent of 26 cents per bushel gain. Chicago gained 22 cents, with KC plus 19 and MPLS up 10. PNW white wheat bids moved up 20-cents to $6.00 coast. This is the strongest upward move we have seen in many moons, since at least when the Chinese came into Chicago and started buying for several weeks between the end of November and early December. That move seemed a little strange, and sure enough in later weeks they cancelled just about every bushel they bought (some 1.2 million metric tonnes). This time it has a more authentic feel, and it might be enough to trigger some exit buying trades among the big trading funds that have sold the downside so hard of late.
Paris milling wheat futures prices have broken out of a 32-session channel to the upside and achieved a 38% retracement of the entire downward move that started in July 2023. The energy showed on Monday April 22 as the largest single upward trading session since the one on the same July ‘23 date that printed that measuring high. Often the bellwether for the Black Sea wheat market, this contract is reacting to clearly escalating war in Ukraine, and not just that the Russians are squeezing as hard as they can ahead of the arrival of a new batch of U.S. weapons and equipment, it also has to be that the Ukrainians have shown effectiveness at striking at Russian maritime targets, which could be extended to shipping. The only other factors that contribute to such a move are shrinking wheat production estimates in the northern hemisphere and fewer globally planted acres due to below-cost prices. Because the price has achieved one of the classic Fibonacci ratio levels, we see a chance that the 32-day-old upward move may require some base-building (a pullback or “correction”) that will allow buyers to set up for another round. The next few sessions will fill in some of the blanks, but the upward bias remains intact unless we see a price below €200.
Sustaining such a decisive move is not cheap. It requires some determined buying just to work through the country selling that is sure to follow, and then to move on up will need some confirming news wires fuel the buying engines.
Tuesday morning pre-dawn trade showed some follow-thru, with Chicago Soft Red Winter (SRW) up 9-12 cents at 2:30-3:00 AM Pacific time. KC Hard Red Winter (HRW) night traders were working about 6-7 cents up, while Minneapolis Hard Red Spring (HRS) futures were up 7-9. This trading was happening with relative normal volume levels, so there is no scary new unknown factor looming, just an increase in market risk.
The grain markets are jittery, with northern hemisphere production still not well defined. Once again we are seeing interesting technical patterns emerging on the charts, but the upward bias is clear, and the spring weather game is on. It is by no means certain that this pop is the beginning of anything large, but it is so refreshing that we should savor it for a moment or two before returning to the grind. Maybe celebrate it by selling a little slice of wheat. This is a really good time to be paying attention to the global markets (not just wheat).
Stay tuned, as we will update if new stuff comes out or the pattern changes.
Market Bullets® Monday, April 22, 2024 Early AM
Israel shot a large but relatively inexpensive missile into an airbase inside of Iran. Apparently no serious damage or casualties resulted. The series of recent, carefully calibrated “retaliation” strikes by Iran and Israel appear to be at an end for the moment, without triggering escalation, as intended. Neither Iran nor Israel spent heavily and both sides seem to have picked targets that did mimimal harm. It is difficult to see what will be promoted in the conflict next. As for the effect on wheat prices, it is a secondary background item, but it is serving as a minor risk-on factor requiring close observation.
Russia continues to grind away on Ukrainian infrastructure, electrical grid and export facilities. The Ukrianian military situation seems to be
On Saturday the House of Representatives passed a bill providing $60.84 billion in aid to Ukraine that may get through the Senate by mid-week. $9.1 Billion of the total $95 Billion package is intended for humanitarian support to Palestinian civilians. ISW: US Senate Intelligence Committee Chairperson Senator Mark Warner reported on April 21 that US provisions of military aid to Ukraine, including long-range ATACMS missiles, will be in transit to Ukraine “by the end of the week” if the Senate passes the supplemental appropriations bill on April 23 and US President Joe Biden signs it by April 24. The market has become jaded about these developments, showing not much more than a slight elevation of overall market risk noise.
So far weather has not brought the moisture amounts hoped for in Kansas and Oklahoma, but there is still an extended forecast bearing rain ahead.
Monday early AM wheat markets are mixed to slightly positive, with Chicago up about 6, KC plus 4 and MPLS unch. Chicago July has once again reverted to the mean of its 32-session upward trend channel. The upside challenge remains the old April 8 high at $5.88/89. The low end tripwire selling price is at $5.50 with a secondary low from march 8 at $5.37. Its still a range-bound deal with a slight upward tilt.
There seems to be enough stress to keep the market honest. The trend is neutral. There is little pressure to do much but wait for a confirmation either way for the moment. The big picture is a pending harvest with reasonably good growing conditions, and continuing aggressive sales by Russia in the light of a firm U.S. Dollar. We are looking at a complex environment for wheat marketing ahead.
This stuff is trackable. Let’s Track it!
Market Bullets® Friday, April 19, 2024 Weekly Close
The wheat complex worked hard and accomplished very little for the week. Chicago led the way, thanks to a last-day rally able to finish with a plus 10¾ cent in the front month contract. Minneapolis Hard Red Spring (HRS) was positive 4¾ cents, while Kansas City Hard Red Winter (HRW) lagged the group with a minus 3½, likely the victim of good forecasts for rain in Kansas and Oklahoma.
Chicago repudiated Wednesday’s July contract 12½-cent downward spike (in which KC and MPLS did not fully participate). The short-term upward channel in Chicago is intact following that challenge of its lower boundary, but the big picture is still one of price weakness.
The CFTC Commitment of Traders (CoT) reports as of the end of last week showed a continued expansion of trading fund net short-sold positions. It will take some kind of stimulus to push the big speculative entities into covering those sold positions
The net trend for the wheat complex remains flat to mildly positive, but very near multi-year lows already established. Improvement in wheat crop conditions in the northern hemisphere could prevent meaningful upside price breakouts, and potentially new lows could be printed on a failure to hold above the bottom end of the recent sideways run. Until this setup is shifted, it is clearly best to stay on plan and make incremental wheat sales on schedule. The expenses and risks of sitting on wheat in the bin are not justified in this market environment. Call your merchant for strategies.
Stay tuned
Market Bullets® Friday, April 19, 2024 Early AM
Early AM trade in Chicago showed a 22-cent upside pop to $5.74¾ starting at about 6:00 PM and ending at about 10:00 PM Pacific Time, when a fade back to the middle of that range began. This kind of quick rally in the middle of the night is not unheard of, but is uncommon. The volume of trading did increase, but not massively. The night trade is usually very low volume, so illiquidity allows sudden price moves stimulated by larger than normal orders. Once the order had been fulfilled, the market went back to more normal behavior. It is encouraging to see positive numbers even if there is no explanation for the activity. The same pattern showed up in KC wheat and to a lesser extent in Minneapolis.
The weekly wheat export sales report revealed a net reduction with net cancellations of 93,556 metric tonnes, 123,700 tonnes cancelled by China and 48,000 for unknown destinations.
Rain in Argentina is slowing corn and soybean harvest. Rain in France and Germany is slowing spring planting.
Overall global grain production estimates for the year continue to very slowly decline.The International Grains Council adjusted their forecast by 3 million metric tonnes (a little over 1/10 of one percent).
Wheat complex accomplished very little in Thursday’s session. Friday’s early excitement may allow some follow-thru in the day session. The price remains within the 31-session upward-sloped channel.
This stuff is trackable. Let’s track it!
Market Bullets® Thursday, April 18, 2024 Early AM
Pre-dawn trading on Thursday shows Chicago up 3 cents to a nickel. KC also up 3 Minneapolis leading again, up 6½. All of the charts are holding inside of a 10-week, 50-cent range. Its just a waiting period, as the wheat market is balanced around fair value. Most wheat producers are seeing local prices very near break-even, slowing origination movement out of the country and in some cases leading to decisions to switch assets to other crops.
Weather in Russia is causing doubts about previous optimistic production estimates. Its still early.
There is rain in the forecast for most of the U.S. wheat ground over the next 10-day to 3-weeks.
The charts have been flat long enough to call it a “base”, so the next move will have a measuring mark. The downside price potential still exists, but it is far smaller than it was at the first of the calendar year (-$2.30 in Chicago, -$3.06 KC, -$3.01 MPLS, -$.95 PNW White. The previous chart patterns that projected to the downside have been nominally fulfilled, leaving little to be achieved. This does not proclaim that there is a large rally imminent, it only suggests that the risk on sitting on expensively stored wheat is smaller. The cost of storing wheat in the bin is rising as inflation and interest rates continue to eat wheat-dollar value. Ask your merchant how to soften the sting of storage costs.
Interest rates are still rising, as inflation continues.
At some point, the money that has driven gold to new all-time highs will be looking for new values. Grains at or near historical lows become attractive in that light. The shift in that direction will be detected early via the charts.
Stay tuned.
Market Bullets® Wednesday, April 17, 2024 Early AM
Wheat planted acreages in some major production regions of the world are shrinking. For example, French soft wheat planted areas are expected to be down about 7.7% this year. This is at least partly driven by lower global prices, as the market does exactly what it is supposed to do; The invisible hand of the market plants, and having planted, moves on…
Egypt is working their wheat import receiving schedule at about 6 weeks out, a moderately tight time frame. When large buyers perceive potential rising prices or difficulty in securing supplies they tend to extend the shipping schedule frontier. Most of the global buyers have been relaxed for many months, having been rewarded repeatedly for delaying purchases. This will change at some point, but the drivers for that change are not yet visible. This amounts to stored buying energy that will become a powerful price-positive factor, something like a large, accumulated net short-sold position in the hands of a speculative entity.
Adding to Tuesday’s crop condition comment: Kansas Hard Red Winter wheat condition is already deteriorating due to dry conditions. The Good-to-Excellent rating dropped 6 points week-over-week.
The wheat market has shown resilience, or at least some buoyancy in the last month, mostly based on anticipated normal spring weather vagaries and the occasional war. Every day that passes without the emergence of any serious regional production problems, or global problems with food is a day closer to harvest in the northern hemisphere and easy wheat purchasing for big importers. It is vital to work a good incremental sales plan in this environment, as there is no guarantee of large price increases in the foreseeable future, and there is some mildly increased potential for downside.
This stuff is trackable. Let’s track it!
Market Bullets® Tuesday, April 16, 2024 Early AM
Very early trade Tuesday showed Chicago and KC wheat flat to very slightly negative, even as Minneapolis spring wheat futures were 7-8 cents higher. The closing settlement in Paris milling wheat was also about unchanged.
The bellwether Chicago market is challenging the low end of its 27-session upward channel (again). This is the 5th attempt to penetrate the rising low-side channel line since the first week of March. A lack of conviction is evident as the price is “tippy-toeing” along that line.
U.S. national winter wheat crop condition reports show unchanged to down 1% in the Good-to-Excellent rating categories. Kansas, at 43% GeX will need some moisture soon or declines will begin to show. Washington and Idaho spring wheat seeding both show ahead of normal pace. Idaho is 39% done versus 28% and Washington is 42% versus 40% in the ground.
The weekly export loading inspections for wheat are now at 15.921 million metric tonnes, 9.2% below the same time last year compared to a 16% lag showing only a few weeks back. Sales have been at or above last year’s totals for weeks, so shipments have been expected to catch up.
The U.S. Dollar Index is rising. War in the Middle East seems likely to continue to ramp slowly higher. Although this is an indirect influence on wheat prices it may provide some motivation for wheat to rally, as global markets do not respond well to uncertainty as a general factor, but most autocratic governments understand that large numbers of hungry citizens are dangerous to the incumbent regime, making wheat consumption inelastic compared to consumer goods. If there is any downside potential it seems unlikely to be large, as the current price of wheat is near or below the cost of production in significant areas of the world.
The price trend of wheat has pulled back 20 cents from recent highs. This kind of channel range-based pattern, both upward and downward for several weeks each way is likely to become familiar in the current environment. It is a reflection of a market unable to find a mandate. Until there is an injection of new fundamental bias, an ongoing incremental marketing sales campaign based on capturing range movements seems likely to be a good fit for this year. It does test one’s patience.
This stuff is trackable. Let’s track it!
Market Bullets® Monday, April 15, 2024 Early AM
Tax Day!
Since peaking in 1981, U.S. wheat planted area has declined by nearly 39 million acres and production has decreased by nearly 1 billion bushels. The U.S. is ranked #3 in terms of global wheat exports, after Russia #1 and Australia #2. In keeping with totals of recent years, Russia and Ukraine together would account for almost 47 million metric tonnes, or about 29% of total global wheat exports among the top 10 exporting nations. Post-war will lead to even greater totals, but that prospect is quite a way down the road at the moment. The
In the pre-dawn hours of Monday April 15, the Chicago Soft Red Winter (SRW) wheat market was off about 7 cents. KC Hard Red Winter (HRW) wheat futures were down 6 and Minneapolis Hard Red Spring (HRS) wheat was trading down 2½ to 3½ from Friday’s closing settlement.
The trend channel that has contained wheat prices in Chicago remains intact but is about to be challenged on the downward side on any confirmed break below $5.37-$5.38 in May futures (Most May futures positions will begin to be rolled over into July in the next week or so and will be completed in the last half of April). July is true “new crop” for SRW and HRW, while September delivery fits the HRS market harvest schedule better. PNW white wheat also is mostly a September New Crop harvest, but lacks a specific futures contract to match, most often using Chicago SRW as a proxy for risk management.
In the absence of significant fundamental changes, the Charts are the leading attraction. Whatever is to come will show up there first.
Stay tuned to this channel.
Market Bullets® Thursday, April 11, 2024 Early AM
Wheat was trading a couple of cents either side of unch as of 2:15 AM Thursday morning. USDA will release the monthly World Ag Supply/Demand Estimates (WASDE) Thursday at 9:00 AM Pacific, 11:00 Central. Trade estimates are posted in Wednesday’s update below.
Interest rates are rising with 2-Year Treasury Notes at their highest yield since last November’23.
More perspective from MarketBullets after USDA has released data and the trade has had time to digest it a bit.
The wheat trends in Chicago Soft Red Winter (SRW) and KC Hard Red Winter are still upward (or at least sideways in Minneapolis Hard Red Spring (HRS). If the report does not generate any sparks large enough to ignite the fund short-covering fuse, we will just go back to tracking the herd across the valley.
Stay tuned.
Market Bullets® Wednesday, April 10, 2024 Early AM
Scraping the barrel:
Rain in 10-15 day forecasts for U.S. Hard Red Winter (HRW) wheat areas, but Colorado and western Kansas are still in the “below normal” category.
Thursday morning 9:00 AM Pacific Time, 11:00 AM Central will see the monthly World Ag Supply/Demand Estimates reports: The trade pundits are anticipating another increase after the increased March 31 stocks totals. The average guess is 690 million bushels, 17 million over the March report in a range of 670-723 million bushels. World stocks are expected to show a very small 0.4 million metric tonne increase with an average pre-report guess of 259.2 million tonnes. Usually the trading immediately following the data release is a bit “bouncy”, but if there is a surprise that exceeds trade expectations there can be fireworks. This particular report period does not usually trigger excitement, but it is prudent to wait until post-report to place trades.
MOSCOW, April 9 (Reuters) - Russia has seized companies belonging to agricultural firm AgroTerra and placed them under temporary management, including some backed by Dutch investment firms, a decree signed by President Vladimir Putin showed late on Monday. See article <here>.
The FSA Attaché in China estimates that Chinese wheat production in 2024/2025 will be 1% higher than last year at 138 million metric tonnes. This is likely part of the reason for the cancellations of the more-than-a-million tonne purchases of U.S.-origin Soft Red Winter (SRW) wheat in November and December, as China had been projecting crop losses early on.
Russian phyto-sanitary shipping delays of export wheat will likely be cured soon, although there is a certain fog around what the issues really were. It is true that wheat importers have become increasingly sensitive to quality. This is not much of a market price driver, but it could help shift some sales away from Russian sourcing for a short while.
The price charts for wheat as of very early AM Wednesday are showing a reversal gain of most of Tuesday’s 8-cent sag in Chicago (minus 8 ½ in KC, plus 3 in Mpls). Volume is light. The price is trading within a few cents of either side of the 22-session mean line, an upward slope.
The trend is upward if you squint at it a little. Still below the 60-day “BoR” average (see recent previous updates for definition).
Stay awake…tuned. Eventually it will get more interesting.
Market Bullets® Tuesday, April 9, 2024 Early AM
Tek Tok – Last Friday and again Monday morning, Chicago front-month futures accomplished several inflection points on the daily chart. The price stretched out and tapped the 60-day moving average, as well as the outside limit of the 84-session descending channel, and on top of that achieved a 38.2% retracement of the entire move downward from early Dec’23 highs…and by very early AM Tuesday had backed down and away as if the zone was too hot. All the extremely short-term down-moves that have become the rhythm of the last month’s trade have the same kind of pattern; reaching up to a key point at which a breakout seems imminent, then retreating, each time down just enough to establish a slightly higher high than the previous beat. It’s actual trend behavior, but it still seems to be just the first beachhead of a much larger upward move. All this eye-straining text is to suggest that this is just the beginning of a long season of similar behavior. For sellers, it burdens even the best marketing plans, but it is better than watching the price bleed off yet another 50 cents every couple of weeks.
The current pattern is still the range high point of “decision dithering”, as we ponder if the run-up, now 22 sessions old, is completed, now also including the validation of the 38.3% ratio retracement (which potentially resets the Fibonacci meter back to zero). The decision to sell an incremental piece of wheat here can be defended. It makes sense. The only enemy is FOMO (Fear of Missing Out) on the event of a real upward breakout move. The comfort here is that experience says that the “Big Breakout” is statistically relatively rare, requiring a new factor or surprise to the market. The downside has expanded a bit (about 35 cents).
Anticipating the end of any defined trend, even a short-term one, runs against the wisdom that we follow; “Stay on the trend and be patient until the trend fails.” To that end, there is a little tripwire sell point between $5.38 to $5.40 in Chicago May contracts. That doesn’t amount to much, but it is clearly visible. Even white wheat merchandisers will likely take notice of a fail at that point.
The fundamentals are not changing much. Weather is reasonable in the northern hemisphere for growing wheat, quite a bit better than the last couple of years. Russia will have another big crop, even if smaller than the last. U.S. national wheat condition is rated at 56% Good-to-Excellent (GeX) as of the week ending April 7. The rating is unchanged from last week, but there is a small twist: “Good” dropped to 48% from 49% last week, but the point was added to “Excellent”. Last year the overall rating was 27%. The U.S. Dollar Index has not reached outside of its 16-month trading range and is very near the center of that range at present. U.S. export inspections will have to hustle to make the estimated annual total, with an approximate 16% lag to last year’s total. No large global region of wheat production is displaying extreme duress now.
The trend is positive at the top end of its recent upward-tilted range and is testing some heavy technical stress points. The fundamentals are boring at best and running toward negative at worst. Stay on plan and make the incremental sales on schedule. Watch the charts for indications of changes in market winds.
Stay tuned.
Market Bullets® Monday, April 8, 2024 Early AM
The geometric mean of the last 21 days in Chicago wheat prices is about $5.61. As of about 2:30 AM Pacific Time Monday morning, the May contract was trading at $5.63. That about sums up the trading tone and trend for wheat in the last 30 calendar days. It’s an upward channel, but with barely enough energy to keep going. All this last month has been in the context of an 83-day downward statistical channel that started in the first week of December 2023, some 86 cents higher than current trade. The low on March 11 reached back to August of 2020 for a match. This is historically significant, even if it feels like a nap. Even though the road ahead looks bleak, this is no time to be asleep at the wheel!
The trend is upward and is once again reaching the top side of a trading range that has seen five different attempts to break into an accelerated upward curve and has turned back down every time so far. So the thing is up, mostly on the usual spring production questions, but also due to war in Ukraine and Israel. Ranges are frustrating critturs. At the top, there is this moment of truth, where there is either a spring into new price territory or a collapse back to the base. At least there are boundaries that can function as tripwires. Meanwhile, it does seem like this will be the “Year of the Range”, so buckle-up. It’s likely to be a challenging marketing season.
Chicago also just kissed the 60-day moving average (equivalent of about 90 calendar days). This is an arbitrary selection of each days average of the last 60 trading sessions prices which we have chosen for the “Box-o-Rox” signal generator. Its just a very crude, simple, easy way to market wheat, with a 1/12 (8.3%) of total wheat to be sold for each year on deck each calendar month. If the BoR 60-day is above the current price daily settlement, then that allocation is sold immediately and no more will be sold until the next month’s 8.33% comes up for action. If the BoR is below the current close, then the sale is delayed until such time as the BoR moves back above the currently trading price. As long as the BoR is below the current price, no sales will be executed until the BoR moves back above, at which time all of the accumulated monthly allocations will be sold. That’s it! There ain’t no more.
The intention is NOT to create a magical trading system that is always right so you can retire wealthy. It is to create a benchmark that you should be able to easily and consistently beat, or at least to grade your annual marketing efforts by…a yardstick that will lean toward making sales slow and patient when the trend is up and to trigger quicker sales when the trend is not your friend, when the natural tendency is to “hold on until it comes back” (the natural enemy of marketers everywhere). The truth is that human beings are hardwired to cling to losing positions more and more the worse it gets, and to quickly cut off winning positions long before they mature. Box-o-Rox (as in “as dumb as”) is a thing that encourages clear thinking about the trend. Just like MarketBullets!
This stuff is trackable. Let’s track it!
Market Bullets® Friday, April 5, 2024 Early AM
The wheat complex has accomplished one thing so far this holiday-shortened week heading into Friday’s session: It has held onto enough gains to prevent a technical failure and Chicago has managed to cling onto the 20-session upward mean line in spite of inventory and quarterly stocks and planting numbers that were slightly net negative for wheat overall.
Corn and bean futures have both recovered from their respective downward slope move that ended in the last week of February; corn now 28 cents over that low and beans 36 above, but this week to date was not helpful in that effort. Momentum is low in the row crop arena.
The U.S. Dollar Index is flat at about 104, about in the middle of what has become a range-bound affair since the last week of December. Both the Chinese Yuan and Russian Ruble (same site page) have not been distracting their respective leaders from other, more pressing needs. Trade between the two has flourished in the last couple of years. Russia is not having much trouble selling either wheat or oil in spite of any sanction annoyances. The world has reached a kind of stasis, even with the winds of war blowing in Israel and the Middle East neighborhood.
With that background, wheat is still showing some respect for spring crop worries. The funds seem watchful as they guard their big net short-sold positions. More stasis.
“Quiet but alert” is the market tone, and it should also be ours. When this market decides to move, we will see it. Meanwhile, let’s enjoy what is shaping toward a powerful spring season for most wheat producers.
Let’s track it! Stay tuned.
Market Bullets® Thursday, April 4, 2024 Early AM
The trend for the war in Israel and neighboring countries is rising. There has been a steady increase in the language from Iran that indicates more aggressive activity. When Israel hit the compound in Damascus that killed at least 3 senior members of Iran’s Revolutionary Guard, in addition to several other Iranian military personnel, it accelerated the saber rattling.
ISW April 3, 2024: “Several Iranian-backed Iraqi militias have signaled their desire to disrupt the “land bridge” connecting Israel to the Persian Gulf. Harakat Hezbollah al Nujaba Secretary General Akram al Kaabi criticized the “land bridge,” which passes through the United Arab Emirates, Saudi Arabia, and Jordan, in a speech on April 3. Kataib Hezbollah military spokesperson Hussein Moanes similarly declared on April 1 that the group is prepared to arm Iranian-backed militants in Jordan and “cut off” land routes that reach Israel.” The above items do not have a direct effect on wheat prices (yet). The effect on crude oil and derivatives prices has been positive, but muted. Some of the most sensitive “choke points” in global shipments of oil remain functional, but the market is showing some rising anxiety in the form of higher crude oil prices.
Global wheat export business continues without much reaction to any wire news items. Egypt just bought a slug of wheat from several optional origins (non from the U.S. or Canada – no surprise).
At 3:30 AM Pacific Time, Chicago wheat lead contracts were trading right on top of the 19-session geometric mean, just a few cents or less above Wednesday’s closing settlement and still in an upward-biased channel. KC Hard Red Winter wheat futures lead month contracts were also very slightly positive early Thursday, up 2 at $5.83¾. Minneapolis Hard Red Spring (HRS) was up about 7 cents, repudiating a recent break below known chart support.
Overall the wheat market is holding onto a positive slope, now 19 sessions old. Wednesday’s session was positive, and early Thursday trade seems to be holding onto those gains by its teeth.
If Chicago can break above $5.74 it seems likely that some additional buying energy will be encountered. The trend is a bit tenuous, but positive. The top of the recent range remains a decent spot for some incremental cash sales, with the possibility of more gains to come. A failure of the low side between $5.38 - $5.40 would be a tripwire warning on the downside.
Gold prices achieved another record high during Wednesday’s session, a reflection of rising global economic anxiety and a sensitivity to inflation indicators that seem to be intractable. Extremes in some of the “outlying” markets in the background of global wheat trade may be harbingers of change ahead.
Stay tuned.
Market Bullets® Wednesday, April 3, 2024 Early AM
Wednesday’s wheat market did nothing new by returning to the low end of the now-18-session upward channel. Only a couple of days ago it was threatening the top of the channel. For the 4th time in those 18 trading days the threat is to the low side.
There is a little warning tone sounding among the U.S. wheat futures markets. Minneapolis Hard Red Spring (HRS) has failed downward through its 7-week old, flat-bottom pattern. Chicago and KC have both been able to prevent their similar patterns from breaking. All by itself, this sell signal in Minneapolis is not much, but historically it is just such a little pebble that may start something bigger.
There is little buying incentive for end-users of wheat. There is plenty available at the present price levels. Outside of normal book adjustments (many funds are paid based on realized profits based on month and quarter ends), the big trading funds are not feeling much pressure to cover their short-sold positions, and in the last week or two have increased net shorts. Those same funds tend to be technically driven, and the chart patterns that would portray upward bias have not emerged.
The downward bias is not extreme, as the price for wheat has reached levels that slow cash wheat movement to idle speeds in many producing regions.
All of this adds up to a test of patience for marketers of wheat. Marketing plans that feature incremental sales year ‘round have a prominent advantage in long-term negative or flat markets. Stay on plan. Make the sales on time. There are real strategies that allow flexibility. Call your merchant.
Its like fishing for catfish…keep the bait in the water, try not to fall asleep. Watch that line.
Market Bullets® Tuesday, April 2, 2024 Early AM
From ISW April 1, 2024: on Israel killed one of Iran’s senior-most military commanders in Syria in an airstrike on April 1. Israel struck a building directly adjacent to the Iranian embassy in Damascus, killing Brig. Gen. Mohammad Reza Zahedi and some of his top subordinates. The Iranian regime has vowed publicly to avenge Zahedi and is creating a domestic expectation that it will take some dramatic action. This is not a direct wheat price factor, but expansion of war is always a market concern.
USDA’s first Weekly Crop Progress Report for this crop year revealed the 18-state wheat crop condition at 56% good-to-excellent (GEx) versus last year’s 28% at the March 31 mark.
Washington’s winter wheat condition showed 51% GEx, Oregon 71% and Idaho 66%.
Kansas City HRW: Texas 44% GEx, Oklahoma 73% and Kansas 48%.
Chicago SRW: Illinois 64% GEx, Missouri 77% and Ohio 67%.
So far so good, with no serious laggards.
France is seeing their wheat crop rating at 66% GEx.
U.S. wheat export inspections are lagging about 12% behind last year’s pace, an improvement from last month’s 15%. Export sales are slightly ahead of last year. Shipments are expected to catch up by the end of the crop year on May 31.
India, whose wheat production suffered last year from drought, is expected to see a dramatically better crop this season at 112.5 million metric tonnes, an all-time high.
Russian wheat exports are not likely to slow down from their already feverish pace, with a good crop projected there.
Reportable positions by large speculative funds in wheat continue to show heavy net short-sold positions, eventually a source of buying energy if fundamental conditions shift.
For the last 17 trading sessions the Chicago Soft Red Winter (SRW) wheat price charts show an intact upward trend channel, but this pattern still remains within the boundaries of the long-term downward trend. The upside target range for SRW is between $5.71 and $6.01, about 16-46 cents above early morning trade levels on Tuesday, April 2. Last week’s high at $5.68½ is the tripwire alarm for a breakout attempt. The Box-o-Rox 60-day moving average is still above the alarm point, calculating at $575.
Range tops like the one we are at now are always a conundrum. The market tends to honor the boundaries of tested ranges, so selling these prices becomes attractive, but there is always a chance for a gain if there are enough buyers discovered to lift above the range edge. This is where the beauty of an incremental sale really shines. Given the roster of mild market negatives listed above along with the overall downward trend, a range-top sale is reasonable. Once the price is able to prove a new upward bias, then the next sale gains potential to raise the average. It is time to be watching a little more closely.
Stay tuned. Watch Iran’s next few moves.
Market Bullets® Monday, April 1, 2024 Early AM
Chicago Soft Red Winter wheat futures at 3:30 AM Pacific time were trading less than one cent below the statistical mean of the last 16 sessions and well within the range of trade from last Thursday. Last week’s USDA reports were not a big positive for wheat, although the 16-session trend remains positive. Wheat fundamentals are not pushing the market to ration supply. If no new factors to emerge in the next 6-8 weeks it seems unlikely that wheat prices will reach above $5.86 in Chicago front month futures, about 30-35 cents above present trade. A failure to hold above $5.38 would attract selling interests.
Fertilizer prices have been increasing, a seasonally normal pattern. The broken bridge at the Baltimore port entry is expected to reduce supply of Urea to eastern seaboard producers.
Inflation continues to frustrate U.S. consumers, and interest rates are not likely to decline for some time, even if the Fed begins to cut as expected over the next several months. Gold is reaching new all-time highs on Monday’s early trade, even as natural gas is pushing long-term lows and diesel is reaching lows dating back to last Dec’23/Jan’24. Wheat is facing continued aggressive pricing by Russia and Ukraine, whether they are working together or not.
This year is going to demand more deliberate and thoughtful marketing than the last couple of years. Stay on plan.
This stuff is trackable. Let’s track it!
MarketBullets® Thursday, March 28, 2024 Weekly Close (No markets on Good Friday)
USDA All-Wheat Stocks in All Positions: 1.087 billion bushels. High end of pre-report guesses: 1.080. Price-Negative.
USDA All-Wheat Planting Intentions: 47.498 million acres. Average pre-report guess: 47.330. Mild Price-Negative.
USDA Winter wheat Intentions: 34.13 million acres. Average guess: 34.87. Mild Price-Positive.
USDA Spring wheat Intentions: 11.335 million acres. High end of pre-report survey guesses: 11.32. Mild Price Negative.
USDA Corn Planting Intentions were on the very low end of pre-report ideas, market was +15½ cents. Bean Planted Acres Intentions were right on the average guess, market closed down ½-cent.
Chicago wheat futures gained 12¾ cents. KC up 8¼. Minneapolis down 6½. The reports were net slightly price negative, but there was still a “relief rally” as things were not as negative as they might have been.
The short-term technicals remain the most positive for wheat in many months, with Thursday’s Chicago wheat re-confirming the now-ragged and uncertain 1-2-3 reversal bottom with both the highest close and the highest high since march 4th, 18 trading sessions back. Our Box-o-Rox 60-session moving average calculates at $5.77 Chicago versus Thursday’s close at $5.60, so the simplistic and boring marketing benchmark continues to display “sell on plan without delay”. This is just telling us that the big-picture trend is still negative. It is way too easy to ignore the markets when they show conflicting patterns, but there are decent opportunities to capture incremental gains here, and the longer-term does not have much fundamentally going for it. Thursday’s wheat rally (except for Minneapolis Hard Red Spring) could be at least partly blamed on corn’s lower planting intentions, although this makes a weak spot in the chain. Both Corn and Bean acres can still shift rapidly depending on price and weather.
So we head into a 3-day weekend without a real mandate for Monday. Wheat is trying to create a breakout, but is relying on short-covering for an excuse, which is like running an engine on starter fluid.
If you are tired of looking at wheat, have a look at Cocoa…sheesh! Better put some cans of powder away.
Part of what is wrong with cocoa is wildcat gold miners destroying farms. Gold is also at all-time highs.
Stay Tuned
MarketBullets® Wednesday, March 27, 2024 Early AM
Diesel has returned near its long-term lows last traded in January. Curiously, most of the market chatter has been supporting the idea of higher prices, but the charts show only weaker lines. It is always interesting when a market comes to a long-term low, which temps buyers in, only to punish them with new lows. Is the diesel market about to turn positive after a 24-month downward move from $4.67 per gallon to $2.58? (based on 42,000-gallon contracts in New York Harbor locations, not including taxes, transportation to other points, or other costs). The trendline is still negative with no buy signal pattern. It’s getting to the point where it makes some sense to fill the tanks (including heating oil tanks for next winter).
The U.S. Dollar Index is slightly stronger, while the Ruble is slightly weaker, as is the Chinese Yuan. The currency markets are not telegraphing global economic distress, part of an environment in which big spec funds are hunting for movement and finding slim pickings. Once a move begins under such conditions, the money will move rapidly. Anything trading near long-term lows, i.e. wheat, is being watched.
Russian wheat exports are under scrutiny and apparently have been getting enough complaints from buyers about quality to disturb Russian government officials. This kind of problem is temporary, but augurs mildly in favor of U.S. wheat values. The response to the issue has so far been threats to “re-distribute export quotas” among the big oligarch-owned export companies. The boss is unhappy.
European Union wheat exports are lagging last year’s year-to-date total by about 2%. There is little drama in the global wheat trade at present.
The wheat market trend is lower but without momentum. Without significant new fundamental factors, new lows from here seem remote. This should not be taken as a buy signal. Some large speculative traders have their buying shoes on, but they are still on the sidelines.
This stuff is trackable. Let’s track it!
MarketBullets® Tuesday, March 26, 2024 Early AM
Chicago faded out of the confirmation of the 1-2-3 pattern. At this point, it is becoming doubtful that the pattern will survive. This week will become increasingly pre-occupied with the USDA reports due Thursday morning. The nascent 13-day-old trendline is still intact, having moved up 30 cents from the March 11 lows. There just is not much conviction showing.
Weekly U.S. wheat export shipments for the week just ended were reported at 315,395 metric tonnes, down from 294,500 last week. Total shipments for the marketing year-to-date are 2.5 million tonnes behind last year’s pace, although sales continue to run about 5% ahead of the prior year.
The trade is pondering recent pre-USDA report surveys showing anticipated average guesses for March 1 all-wheat stocks to be 1.05 billion bushels, with a range of 1.0 billion to 1.08. Wheat planted acreage is estimated at 47.3 million acres vs 49.6 million last year. The average spring wheat acreage guess is about 10.9 million acres. Most of the observational pressure will be on corn and beans. The reports will be released on Thursday morning at 9:00 AM Pacific and 11:00 Central.
The potential downside of the global price of wheat has been seriously reduced over the last couple of months. The results from low prices are slow to emerge, but they include farmers re-considering how much acreage to commit to wheat as its profitability has declined versus some alternate crops. This is natural and is exactly what is supposed to happen. The re-deployment of farm assets does not happen quickly, and some regions have limited alternatives, but slowing farm sales of existing supplies, along with smaller projected crops in the future will eventually cause prices to rise.
All of that said, the present market tone and behavior portray low energy in either direction. The big trend is still lower, but the little trend is trying to sprout a new upward bias for the first time in many months. This infant trend is going to run into harvest soon. so we will be paying extra attention to downward tripwire-style alarms.
Maybe we will see some fireworks on Thursday…
This stuff is trackable. Let’s track it!
MarketBullets® Monday, March 25, 2024 Early AM
After midnight Sunday, heading into Monday’s trade, Chicago was confirming the 1-2-3 reversal pattern that took so much time and energy over the last week. May contracts, the “front month” in many charts, was up 8 cents, at $5.64, exceeding the required target of $5.56 handily. This is refreshing to see, but to be orthodox about it, we must have a close over that target and not just a intra-day spike.
Kansas City Hard Red Winter (HRW) is lagging 8-10 cents under its $6.05 target to confirm the same pattern reversal with which Chicago is flirting. Minneapolis Hard Red Spring (HRS) futures are also about 12 cents under the tripwire.
All of the major wheat futures markets have displayed a more positive behavior pattern over the last 12 sessions, with Chicago and now Paris leading the way.
Paris Milling Wheat futures on Friday showed a very vigorous upward shot, gaining €7.50 per metric tonne (about $.22 per bushel), easily achieving a 38% retracement, filling an old chart gap from mid-February and printing its best price since February 13 of 2023, probably driven by war escalation beyond the borders of Ukraine, including damage to Russian Navy property. This extension of war beyond the boundaries of the game to date along with the ISIS terror attack in Moscow, has clear potential to disrupt the orderly flow of wheat out of Ukraine and portend a new and creative chapter in the war. This leadership by Paris could provide the spark that lights up a short covering run by the big funds that have profits in large short-sold positions in the U.S. markets.
This week is a nervous week for the trade anyway, with the Stocks-in All Positions and Planting Intentions reports coming out on Thursday the 28th at 9:00 AM Pacific and 11:00 AM Central.
Like any short-covering run in the past, the character of such a move is usually very fast, sharply higher and very short-lived, a difficult pattern to capture, but one that can change the overall tone of the larger market, stimulating end-user buying. Such a move also ignites farmer selling, which had been lagging lately and may overwhelm the buyers at some point. Certainly it is not boring.
This is a good week to observe the tone and character of the wheat markets. It may be the beginning of a period of volatility that could make options more expensive (richer for sellers and nerve wracking for buyers).
The trend is newly positive, still vulnerable, but showing signs of strength. Patience and attention.
Stay tuned for more. It may be entertaining and useful.
MarketBullets® Friday, March 22, 2024 Weekly Close
The only grain that closed the week with a net negative was soybeans at minus 6½ cents. Chicago Soft Red Winter (SRW) wheat led the pack with +26¼ cents (revised on settlement) per bushel for the week. This would have seemed unlikely at the beginning of last week, with all the sales cancellations from China and fairly good crop condition reports for U.S. production, but the realities of impending spring weather and a long-anticipated short covering effort by the large trading funds provided enough support to prevent a failure.
Chicago’s 1-2-3 reversal chart pattern was confirmed, by ¼-cent! This is not a loud “gong” or an inspiration to technically driven buyers! It leaves some confusion. “Is it is, or is it ain’t?” Still, it is confirmation of a familiar, old-fashioned pattern. The only answer will begin to emerge on Sunday evening, March 24th, heading into a week probably filled with discussions of what the USDA Quarterly Stocks-in-All Positions and Planting Intentions reports will reveal on Thursday morning, March 28 at 9:00 AM Pacific Time, 11:00 Central. It may be a bit too much to expect some powerful price rally based on a market that barely made it across the threshold of confirmation.
The trendline is more positive than it has been for many weeks, but that is a low bar. The first target of this raggedy move up is the 38% retracement of the entire move downward from the high price point in the first week of December (just as China had completed its 1.1 million metric tonne series of SRW purchases). That target is about $5.71 (just 16 cents above the close of this week). It is a challenge to work up much enthusiasm for such a paltry run. Maybe USDA will provide some help on Thursday.
If there is any short-term factor with potential buying energy worth watching, it is the large trading firms CFTC aggregate net short-sold positions in wheat. Chicago SRW is looking at 80,000-plus net shorts, KC Hard Red Winter (HRW) futures are reported to contain net short 37.8k, and Minneapolis Hard Red Spring (HRS) is short 22.7K. These totals are mostly in proportion to the relative sizes of their markets. The figures represent contracts that must eventually be bought back (Covered). It’s a pool of captive buyers that sometimes attempt to leave the building all at once…a “short squeeze”. It only takes a strong spark of news, i.e. a government announcement or report, or war, or equivalent. This is not an easy thing to anticipate, but there it is.
Stay tuned, it will show up here.
MarketBullets® Friday, March 22, 2024 Early AM
Tepid. The crowd is quiet. The early session produced no momentum, at least thru 1:30 AM Friday morning. Thursday traded inside of Wednesday, and by the early hours of Friday was still in that range. Interest rates were working higher, as the Fed has backed off of clear rate-cut talk. The U.S. Dollar Index shows no inclination to move out of its sideways channel. The global wheat trade is seeing even the major buyers just sipping at purchases.
Wheat futures markets moving less than 5-6 cents in either direction suggests “fair value” has been found. Any “breakouts” from carefully outlined chart patterns that happen from sneaking over the line by a cent or two are really suspicious and probably should not be taken seriously unless there is some move vigorous follow-thru following.
Stay on plan, make the incremental sales. We need more than we are seeing to justify the cost of waiting for higher prices.
The change is going to come. We will see it here when it does. Stay loose!
MarketBullets® Thursday, March 21, 2024, PM
Wheat traded Thursday entirely within the previous day’s range. Chicago gained 3 cents (call it unch). KC Hard Red Winter (HRW) up 1-2, Minneapolis Hard Red Spring up 1-2, PNW white wheat: unch.
U.S. all-wheat export sales are running about 3% ahead of last year. Shipments are lagging but expected to catch up.
News wires are quiet.
The wheat market trend is sideways with a slight upward bias. No buy or sell signal here. We are watching for a breakout just above this week’s highs-to-date. Chicfront-monthonth futures contracts will confirm a small upside reversal on a close above $5.56 (8 cents above) with a nearby upward target of about $5.71. On the downside, the trigger line is at $5.23 (25 cents below Thursday’s closing settlement).
KC HRW needs about 23 cents and a close above $6.05 to accomplish a positive breakout.
Mpls HRS has to find about 21 cents and a close above $6.77. All the above are within range, but the market is aware of these targets and has shown a hesitance to attack those levels.
Stay tuned.
MarketBullets® Thursday, March 21, 2024, Early AM
Wheat is holding onto gains, although a bit tenuously. Chicago at about 1:00 AM PDT Thursday was up about 5-6 cents, back to within 3-4 cents of Monday’s highs. This creates a clear range-top challenge of the last dozen or so sessions since March 5th. This tippy-toeing around key prices is not a sign of a confident market, and it definitely takes some of the power out of the possible reversal pattern, although the pattern remains intact, and if confirmed, projects upward to something like the 38% retracement line at $5.72 in May Chicago futures. It’s just a bit fussy and a little too precious. Bah, humbug!
If Russian wheat sales are slowing, weather is not perfect in several major regions producing wheat this year, and there is a persistent knocking at the door of expanding war, the market must add risk premium…but there really is plenty of wheat at present. There is no need to claw over the top of each other to buy wheat. Technical patterns notwithstanding, we don’t have much to buy on, but that does not mean hold on grimly waiting for better prices, either!
Perhaps next week’s Stocks-In-All-Positions and Prospective Planting reports will provide some fuel for the bull. For now we are being asked to narrow our definition of “uptrend” to a 50-cent or less frame of reference, profoundly different than the picture we had over the last couple of years. This demands some mental and emotional stretching and gymnastics with a background of rising input costs and a feverish election season for which we are not well seasoned. The only real comfort then becomes the study of how to optimize wheat marketing plans and sales. Anxiety about the price of wheat can be reduced with a thoughtful plan that includes incremental sales and criteria that define price objectives.
A “mere” 50-cent rally has become a grand idea! This stuff is trackable. Let’s track it!
MarketBullets® Wednesday, March 20, 2024, Closing Update
Chicago wheat charts in early day-session trade looked like a “failure” with regard to the near-completion of a 1-2-3 reversal. The low came at a negative 14-½ cent drop around 7:30 AM PDT, but then the market managed to bounce back up and close down only 6¾ cents, enough to cloud the issue a bit, but leaving the reversal door still open. Thursday’s trade will take up the question again, although today’s trade dented the enthusiasm some. This is trading entertainment while we wait for more serious stuff.
Egypt’s GASC on Wednesday booked 110,000 metric tonnes of wheat via regular tender, although this is quite a bit smaller amount than normal, which makes it appear that they will be applying at the wheat window in Moscow for private discounts. The export tender market seems to be trading a little bit lower than the “official” Russian minimum price.
European wheat production forecasts are shrinking. The latest estmates have the total production down by about 4%.
Mexican demand for corn and wheat is expected to increase, according to the Foreign Ag Service (FAS).
India is looking at a shrinking inventory of wheat stocks.
The Russian Ruble is leaning toward the weaker side, making already low-priced Russian wheat just a little less costly.
The wheat price trend has paused, and is now range-bound, with Chicago’s possible break-out highs at $5.56 (about 8-10 cents above Wednesday’s close in the May contracts - front month). The failure low would be at about $5.23 (about 25 cents below current).
Stay tuned to this channel for the next chapter…
MarketBullets® Tuesday, March 19, 2024, Close
A definable technical pattern is about to emerge. Just a few pennies more and the Chicago, KC and Minneapolis markets will all display an old familiar, “1-2-3” setup for a reversal to the upside. The pattern consists of a significant low, followed by a move upward of at least a few sessions that sets a target high, a return “test” of the original low (with no new low), and then a final move upward that exceeds the first high. We are on the threshold of this thing that, when confirmed, has about a 60%-70% historical success rate. It is not necessarily considered the harbinger of a long move, but its potential reliability is interesting as a warning of change.
Hard Red Winter wheat ratings remain steady to mildly better for most states. Kansas posted a 2% gain to 55% good the excellent. Texas welcomed a 2% better GEx to 48%. Oklahoma faded with GEx at 61%, still a solidly better stand than any time in the last couple of years. So far the overall wheat growing conditions are much stronger than in recent years.
Considering an obvious crop in the making, the price moves of the last week or two appear technical in nature, although it is a natural time to see spring weather risk premium added back to a market that had some serious negative momentum just a short time ago.
It's time to be more observant of the market shape. This year we will have to earn our good marketing scores.
This stuff is trackable. Let’s track it!
MarketBullets® Tuesday, March 19, 2024, Early AM
The International Grains Council (IGC) is forecasting that global wheat production in 2024/2025 will grow by one per cent (9.4 million mt) to 799 million mt. According to the IGC, a significant portion of the increase in global wheat production is expected to come from better crops in Australia and Argentina.
The IGC says larger global production will be offset by small beginning stocks as total supply is supposed to be 3.8 million mt lower than in 2023/2024.
Wheat demand is expected to be one percent higher in the upcoming season at 1.3 million mt which would cause global ending stocks to fall by two percent (5.1 million mt) to 262.4 million mt.
The above three bullet points are a slice from a brilliant source of wheat market insight: SaskWheat. These Canadians have a clean and clear presentation, and their publication is worth examining. The aspect of this source that struck me is its simplicity and directness, also known as “Elegance”. Let us know if this impression is accurate. https://saskwheat.ca/wheat-market-outlook-and-prices/#global
Very early trade on Tuesday morning had Chicago and KC down a couple of cents. Minneapolis HRS was off less than a penny. The U.S. Dollar Index was just a tid higher, still trading in the sideways range that has contained its price for nearly 16 months. Corn and beans were both about unchanged. Gold continues to push new all-time highs. Natural gas is resting near long-term lows.
This wheat market has been beating down on prices for so long that many producers have ceased any cash selling except for the absolute minimum necessary to keep running. It is intuitive to even the casual observer that there are likely to be price rallies in the weeks or months to come, but these will be against the fundamental stream for quite a while. The world does not adjust committed acreage easily, but demand does expand as price falls. If there is a season for market volatility, it is the spring “silly season” where weather becomes dominant. To this mix add war and economic fears along with a U.S. presidential election, and we have a good chance for occasional price violence. For marketers of wheat, opportunistic attitude and patience may seem an oxymoronic pairing, but it is just what is needed to do well in this environment. Contra-trend price moves are tough to capture, but patience with an uptrend is essential. The charts become more and more valuable because they reveal the behavior of the market beast more quickly than government reports or news wires.
Chicago wheat futures, despite the leakage from canceled sales, has held onto some gains, along with every other major wheat market. It’s a little pathetic how easy it is to please us now, with upward moves of such paltry amounts, i.e. less than 25 cents per bushel, but every large move must begin with a smaller one. At least we have a clearly identified lower boundary, which if it fails, we can take action. This is no time to ignore carefully thought-out marketing plans. It is vital to make those incremental sales on schedule. This has been illustrated very clearly and repeatedly over the last year. Watch Chicago for ques and have defined objectives on the table ahead of time. Capitulation is not equal to making one or two small sales at historical lows, it is abandoning plans and dumping larger amounts under duress.
We will stay tuned. You can too!
MarketBullets® Monday, March 18, 2024, Early AM
Copper is breaking out to the upside of a long-term negative trend channel. Lumber is also challenging its long-term channel, but that channel was slowly upward and is accelerating. These indicators are not direct wheat influencers, but they suggest a positive change in global economic activity. Another interesting short-term flash is that the Chinese Yuan is strengthening, at least in the short term. They just finished their annual BFM “Big Meeting”, during which they announced economic policy changes of which the market apparently approved. The “Hang Seng” Index is reflecting some positive lift, although not explosively. All of this suggests that there are some changes in the wind. Wheat may not have a ticket to ride on this bus, but any hint of positive change considering the exhausting long-term downward bias in wheat prices would be at least a trigger for closer examination. This is not a good time to be asleep at the marketing wheel!
Fear not! The wheat charts do not show much upward power. The weeklies are flat and there is still dry powder in the hands of the funds' large, short-sold positions. Let's not allow Fear of Missing Out (FOMO) to be the driver here!
This stuff is trackable. Let’s track it!
MarketBullets® Friday, March 15, 2024, Closing Update
The Chinese purchases of late November/early December (1.1+ Million Metric Tonnes) pumped a lotta air into Chicago wheat prices. Now that air is leaking out quickly. At this point, they have canceled about half of the original total and that may not be finished. They have also cancelled or suspended about a million tonnes of Australian wheat shipments. It is doubtful that they have done so with any Russian purchases, mostly because the prices for which they had agreed are quite a bit lower.
The resumption of the parade of new low prices may be about to resume. Going home on Friday, March 15, Chicago Soft Red Winter (SRW) was a nickel above its 3.5-year low, set on March 11. By contrast, KC Hard Red Winter (HRW) was about 16 cents above its long-term low, Minneapolis also about 5 cents over the low, and Paris Milling Wheat futures were €7.00 above (approximately $.20 per bushel).
The wheat price trend is lower, unless suddenly the Chinese decide to return to the market. It begins to look like they decided they are going to have a crop after all.
IKAR projects Russian wheat production to reach 93 million metric tonnes with exports at 50 million tonnes. Another heavy year from Vladimir representing a lid on global wheat prices. The rallies may be healthy, but will be mostly technically driven, fast, intense and done. “range-bound” makes a difficult trade, but it’s useful for cash sellers. It’s a chartist’s year! The obvious trade when any market is at historical, long-term lows is to look for a buy. The problem with those heavy lows is that the factors that bring them are very large and slow-moving creatures that do not die easily or quickly.
USDA will release a very important set of data on Thursday, March 28th at 9:00 AM Pacific Daylight Time, 11:00 AM Central (10 days from Monday, March 18). Stocks-In-All-Positions quarterly inventory and Prospective Plantings, both of these datasets are heavily anticipated this time of year.
Allendale’s farmer survey has US plantings of:
· Corn at 93.5 mil acres, down 1.2% from 2023 (USDA 91.0)
· Soybeans at 85.8 mil acres, up 2.7% (USDA 87.5)
· Wheat at 47.6 mil acres, down 3.9% (USDA 47.0)
Interest rates are steady, the U.S. Dollar Index is steady, gold is at an all-time high (touched $2,200 on March 8, 2024) and Diesel just closed at its highest since February 19. Natural Gas, a key component of anhydrous ammonia, is still in a downtrend that dates back to July of 2020.
Overall the market is weak, and the global economy is feverish (weird dreams and confused easily). Grains in general are reaching a key low soon, but over-anticipation of lows is a bad habit. They will show up on the charts first.
Stay tuned here for more.
MarketBullets® Friday, March 15, 2024, Early AM Update
Chinese cancellations of U.S. origin wheat contracts have now reached over half of the purchases made in November and December 2023. This is the most they have ever cancelled in at least the last 24 years. It is becoming clear that China either does not need the wheat or that they can source it more cheaply elsewhere. The Australians are also having some significant amounts of wheat sales to China cancelled or suspended. The wheat market has held up well during this series of contract terminations, leading some to expect more strength ahead.
Friday early morning trade had Chicago trading mixed to unch’d. KC showed 2-4 cents lower and Minneapolis was trading up 1-2 cents. These are not markets in capitulation…at least not yet.
The International Grains Council (IGC), an intergovernmental organization based in London, UK, has released their estimate for a decline in grains production including wheat and coarse grains of 6 million metric tonnes (less than 1% adjustment).
Germany is seeing cuts in wheat production acreage by about 7.5%. This, along with the IGC reduction above is not a market-moving statistic, but we take it as an indication that planted acres around the globe are likely to come down due to lower prices…not a shock, as it is what the market is supposed to trigger. “The cure for low prices is low prices” is a well-worn phrase, but it is true.
The wheat market has put in new lows in the last 10 days. The factors that have driven us to this point are still present, but there is clearly some spring season risk premium-adding going on. Just remember that a good base from which to launch a real rally takes time. The trend remains flat to negative.
This is a good time to watch the price momentum on the charts. When the trend change finally shows itself, it will be visible on the charts first.
Stay on plan. Stay tuned.
MarketBullets® Thursday, March 14, 2024, Early AM Update
Thursday very early trade had Chicago down about 3-4 cents, KC front month (May) down 11 and Minneapolis off about 4-5. Multi-year contract lows are 10-30 cents below current prices depending on variety. The upward bias we have been experiencing is running into some headwinds, but remains intact for the moment. The overall trend in wheat prices is flat to negative, but corn and soybeans seem to be finding some rally energy, which may help sympathetic support for wheat.
NASA’s GRACE root zone soil moisture shows the Hard Red Winter wheat production areas of N Texas and SW Kansas better than this time last year. Overall wheat production in the Continental U.S. (CONUS) has little root zone moisture stress than the last two years.
Data / maps available at nasagrace.unl.edu through a partnership with the National Drought Mitigation Center.
Scientists at NASA’s Goddard Space Flight Center generate groundwater and soil moisture drought indicators each week. They are based on terrestrial water storage observations derived from GRACE-FO satellite data and integrated with other observations, using a sophisticated numerical model of land surface water and energy processes. The drought indicators describe current wet or dry conditions, expressed as a percentile showing the probability of occurrence for that particular location and time of year, with lower values (warm colors) meaning dryer than normal, and higher values (blues) meaning wetter than normal. These are provided as both images and binary data files.
Chinese wheat purchase cancellations are not just in the U.S.. Australia is also seeing some wheat sales cancelled. China is not the only buyer that can make the math work. Other importers of wheat and other grains are warming up the calculators to see if it makes sense to cancel/re-write grain buys. Bear in mind that a cancellation of a large purchase contract does not allow any buyer to simply walk away. It requires that a complex series of agreements and transactions between seller(s), shipper(s), and others be unwound. There is contract language that addresses this not-uncommon event, including penalties, which can make it expensive, but not impossible to overcome the problems created, especially in a market that has seen very large price declines in a short period. Even if China was only using the import contracts to cover perceived risks in crop production at home, it may have been ultimately a wash, as there have undoubtedly been solid futures price hedges in place every step of the way.
NEW DELHI/MUMBAI, March 12 (Reuters) - Indian wheat inventories held in government warehouses dropped to 9.7 million metric tons, the lowest since 2017, after two straight years of low crops prompted the state to sell record volumes to boost domestic supplies and lower local prices.
Ukraine’s grain union projects their 2024 wheat crop will be the smallest in 12 years at 20 MMT, down some 14.5% from last year.
This could get a little bit more interesting as the spring weather opens up. Early harvest for southern HRW and SE areas of HRW are just 3-4 weeks away, but there is lots of weather-vulnerable wheat jout there quite a ways from the bin.
Stay tuned.
MarketBullets® Wednesday, March 13, 2024, Early AM Update
Dry weather in the Southern hemisphere has cost Brazil some production potential in wheat, soybeans and corn.
Winter wheat production weather in the U.S. is at the (very) early stage of coffee-talk stage about spring weather. The market is not yet anxious, but is seeking reasons to rally. Those reasons are still speculative.
Russian wheat prices have remained in a lower trend pattern since the first week of January. No change.
Farm sales in Argentina have slowed, but the same is so across the globe.
Interest rates are steady, and the U.S. Dollar Index is trading near the center of a 16-month sideways range.
The very short-term rally in wheat is still alive, with Chicago trading very close to the lower-trending 66-day center mean line of the channel. The ratio-derived upside target would be near $5.90 in May Chicago futures, about 40 cents above current. There is no powerful factor in play to raise wheat prices, but the eyes are on weather in both the southern and northern hemisphere wheat regions. Ukraine wheat shipments are expected to continue to decline slowly, as war conditions are making farming and shipping more difficult. No surprises.
Stay tuned here for further developments (if any).
MarketBullets® Tuesday, March 12, 2024, Early AM Update
Very early trade Tuesday morning showed Chicago down about 3, KC and Minneapolis both down about 5-6 cents. No violations of trend channels or other disturbances as of 3:00 AM Pacific Time.
Crop conditions in U.S. winter wheat country are fluctuating slightly, with Texas at about 44% Good-to-Excellent as example. Most of the major winter wheat states have much better moisture this year.
U.S. export shipments as of the end of last week were at 13.37 million metric tonnes marketing year-to-date versus 15.9 last year, just under a 16% lag. Sales have been looking better than last year, so it should be expected to see shipments catch up, even with Chinese cancellations of Soft Red Winter (SRW) Chicago wheat (about 38% of the previously purchased amount) in November and December. It should not be a shock to see additional contract cancellations with the markets so far below the original prices paid. This is not a political decision by China. It is normal when the math works to cancel/re-write.
The current short-term behavior of wheat (corn and soybeans) has been technically more positive, especially soybeans. This kind of “corrective” action is normal and may trigger larger moves with any weather news. If the duration and magnitude of the down-move over the last 18 months or longer are taken into consideration, technical retracements could be economically significant, so it is time to be paying attention to the patterns and trends a little more closely.
Stay tuned to this channel for trend alerts!
MarketBullets® Friday, March 8, 2024, Post-WASDE Update
USDA: “The outlook for 2023/24 U.S. wheat this month is for unchanged supplies and domestic use, lower exports, and higher ending stocks. Exports are reduced 15 million bushels to 710 million with reductions for Soft Red Winter and Hard Red Winter. Ending stocks are raised by an equivalent amount to 673 million bushels and are 18 percent higher than last year. The season-average farm price is reduced $0.05 per bushel to $7.15. The global wheat outlook for 2023/24 is for larger supplies, consumption, and trade with reduced stocks. Supplies are projected to increase 0.8 million tons to 1,057.8 million, primarily on higher government production estimates for Australia, Russia, and Argentina partially offset by reductions for the EU and Serbia. Global consumption is raised 1.5 million tons to 799.0 million, mainly on higher feed and residual use for the EU, Kazakhstan, and Indonesia. World trade is raised 1.4 million tons to 212.1 million on higher exports by Ukraine, Australia, and Turkey. Projected 2023/24 global ending stocks are lowered 0.6 million tons to 258.8 million, the lowest since 2015/16.”
Everyone knows that there are too many soybeans in the world, but in the last week, there has been a technical price breakout to the upside…not a massive one, but an undeniable escape from the stat standard deviation channel. This is a pebble rolling down the hill past us…could be important. May just be a pebble. We will watch.
Another 110,000 metric tonne Chinese Soft Red Winter wheat cancelation Friday morning, on top of a previous cancellation of 130,000 tonnes Thursday. This is normal in such a negative market, but the timing in a week when wheat was trying to rally was a net negative in Chicago. PNW white wheat also was weaker, possibly in sympathy with SRW.
Could soybeans lead wheat and corn higher? This is not a normal thing, but it does tend to lend sympathetic support and make importers begin to pay better attention to the global market tone. The trend in wheat has not changed from flat/negative to a flat/positive, but there is a distinct pause in the downside momentum. Now we will see if crop conditions in the northern hemisphere can be maintained. Moisture is definitely not the factor it was last year or the previous year. At least we will be sitting up straighter and surfing memes less.
Monday very early trade in wheat was unch to -1/4-cent in Chicago. KC and Minneapolis were down 3½ or so…really nothing to hang your baseball mitt on.
This stuff is trackable. Let’s track it!
MarketBullets® Friday, March 8, 2024, Pre-WASDE Update
World Ag Supply/Demand Estimates (WASDE) to be released 9:00 AM Pacific Time, 11:00 AM Central. Most focus on corn and soybean crop estimates. Some ideas that World wheat ending stocks estimate will be increased slightly. The market usually anticipates USDA reports by going into a holding pattern for a couple of days until after the report, and then either resumes previous trading programs, or makes adjustments according to report results. In either case there is a moderate surge in trade after the data release.
We will issue fresh MarketBullets after the report, along with the regular weekly summary.
Thanks for your support!
MarketBullets® Thursday, March 7, 2024, Early AM
Following the new lows printed on Wednesday, the very early morning trade in Chicago wheat showed a steady tone with a little bounce back. The trade is aware that this market is “oversold”, but it takes a certain kind of confidence to step in front of a southbound train. The would-be buyers are determined to wait for a bit of evidence that the price decline will, if not end, then at least pause for a time. This is not hard to imagine. It is healthy to “correct” extended moves with more than a few hours of trade. This would be a quick fix, only a temporary move up, but it could be more than a few cents, maybe after this Friday morning’s USDA World Ag Supply/Demand Estimates (WASDE) report. Even if the trade gets the pre-report guesses right, there is often a “brakes off” jump after a report.
Corn and soybeans have begun to suggest a rise out of the abyss, even if it is only to make technical adjustments, and they also have a report to anticipate, more than the wheat does, with planting estimates to be released.
There should be no surprise if there is a rally between now and the close of trade Friday.
There is a suggestion of a flurry of import buyers at the window this week. Egypt, Algeria and others have been actively seeking offers. Those buyers may have become lazy over the last year of hand-to-mouth buying for just-in-time inventory, but they are not likely to be unaware of the bargain buying opportunity on the table. Even if wheat continues to drift lower, the downside risk has been steadily shrinking. There has been street-talk that China may be cancelling some of those wheat purchases they made back in November…Yes, its getting that cheap!
We are getting close to some kind of low, but it is not a good trading plan to jump ahead anticipating a bottom. There always seems to be one more lash from a dying dinosaur’s tail that can be lethal. The trendline is unmistakably lower until it is not.
This market is getting more interesting, and it is trackable. Let’s track it!
MarketBullets® Tuesday, March 5, 2024, Close:
Now the 8th Chicago Soft Red Winter (SRW) wheat session with downward bias since the most recent high bump of Feb 22, minus 48 cents.
Kansas City Hard Red Winter (HRW) is building a base, with three lows in the $5.56-$5.60 range, the failure of which would stimulate some selling energy.
Minneapolis Hard Red Spring (HRS) has shown the most positive attitude of the 3 major U.S. futures contracts, with a double bottom around $6.41 and a net gain of about 12-13 cents in the post-Feb 22 peak.
PNW Soft White Winter (SWW) has achieved a negative 50-cent move in the above time frame.
Pre-report guesses starting to emerge going into Friday’s World Ag Supply/Demand Estimates (WASDE): the surveyed trade pundits are indicating an average expectation for smaller all-wheat ending stocks by a very small adjustment of 200k bushels down to 657.8 million. The range of guesses was very wide, but almost evenly balanced (make of that what you will). Global wheat carryout is expected to shrink by 1.3 million metric tonnes, largely due to greater demand on lower prices.
Gather all of the above, mash it into a mason jar, add moisture with a dash of aggressive Russian and Ukrainian sales. Then set it on the counter next to the toaster and go out to the shop. When you get back, it will still be there, making a bad smell. You can use it on the driveway to kill weeds.
The trend remains negative, but downside risk is shrinking. Stay on this channel.
MarketBullets® Tuesday, March 5, 2024, Early AM:
Corn and soybeans are dominating the wires, with China buying from Ukraine and some from the U.S. and beans hitting five-year net short-sold positions in the hands of the funds. The problem the bean markets has to solve is where all of the {potential) beans coming along in Brazil and Argentina will go before the U.S. crop hits.
Grain futures are testing trend channel tops, creating pressure on the trade to choose a side. With all of the recent lows along with spring work top-of-mind, farm selling has slowed, but a successful breakout of the range tops would stimulate some sales, keeping the brakes on larger upward moves in any early rally.
Wheat markets are close enough to long-term chart lows that the slow cash wheat movement is bound to have at least a supportive effect, but the same problem appears; any rally beyond the established overhead resistance is bound to trigger sales.
Some global wheat price strength came out of India’s troubles in the last week or so from crop damage due to weather, although this is not a big export source.
U.S. wheat exports are lagging at a steady 16%-17% behind last year’s pace. With 13 weeks to go in the marketing crop year, we may see some adjustments start to appear in USDA’s estimates.
There is a World Ag Supply/Demand Estimate report due out Friday, March 8 at 9:00 AM Pacific Time, 11:00 AM Central. The March WASDE does not usually trigger wheat price adjustments directly, but it is a key report for beans and corn. Many eyes will be on this one.
The wheat trend is not changed from sideways to lower, although the season to expect such changes is upon us. The leader in global wheat futures is likely to be Paris Milling Wheat, an 11.5% protein contract that is the current proxy for Russian wheat price indications. Paris has been printing low after low, with hardly a nod to the buy side. It is getting “oversold”, a condition that always seems to last much longer than it should!
Stay tuned. The WASDE on Friday will keep the trade occupied for the next few days. Steady.
MarketBullets® Sunday PM - Monday Early AM, March 3-4, 2024:
There is a terrific temptation to buy wheat, if not today, then soon. The problem with giving into such a magnetic pull from the market is that this phenomenon has occurred multiple times over the last 6 months without follow-thru, i.e. “If you liked it at $6.00, you gotta love it at $5.55.” There is no current buy signal, nor is there any currently looming fundamental reason for wheat prices to ration supply. There are rational possibilities that need to be monitored, mostly concerning either production weather in the northern hemisphere or money movement out of exhausted, overbought outside markets, but these are not actually on the market radar screen yet, just a glint in the fund manager’s eye.
Country movement of grains from the farm to the end-user has slowed to a crawl all over the globe. This is a supportive price factor, but it is temporary, as all it takes to shake it loose is a price bump. Eventually the stuff has to be sold, so it is really powerful to sell incrementally on a plan. If the logic is, “Sell slowly on the way up, and sell rapidly on the way down.” the current configuration is to go ahead with the next tranche and, if the price turns upward for reasons not yet discerned, then hold the next sale. The objective being to end up with an average sale for the year above the “indicator of central tendency” of your choice. This has served us well for this year to date, with steady liquidations that all look brilliant at this point.
Sunday night into early Monday morning wheat futures trade shows wheat within a couple of cents higher or lower, nothing to trigger any actions. When the change comes we will see it!
This stuff is trackable. Let’s track it!
MarketBullets® Sunday PM, March 3, 2024:
For your consideration: When charts are applied in trading or controlling risk, the eye is the instrument. Knowing the trend is step one. The perception of possible benefit from price movement is not the same for any two of many thousands of participants active at any given moment. There is no magic, no formula that always produces profits, no system that is always right. The Ai may catalog and back test faster than ever, but the market is not a machine. It is a living, breathing being with emotions and motivations all its own; motivations which change depending on whose money is at stake and what matrix of data is being applied. With all of that, it is as predictable as weather, or as groups of human beings may be. It is not random but runs on a calculus of probability that is subject to a sort of quantum “observer effect”. It is not a casino unless you treat it like one. It is a risk exchange for real-world risk that exists naturally and must be dealt with by anyone in the business of growing, handling, shipping, or consuming commodities. Anyone who “rolls the bones” in the futures market without due regard to statistical probability is subject to the same results as in a casino. Some of us can afford the gambler’s approach. Others recognize that it is a business with risk that must be managed. None can expect economic survival if entering the futures market without rigorous limits on exposure. Price charts are the prime tool for measuring this exposure.
MarketBullets® Friday, March 1, 2024: Close
The trendline has not changed. It remains negative, with Paris Milling Wheat signaling a lower path on Friday. The market is telling producers to hold up on sales, which they are doing. Meanwhile, there is plenty of wheat for sale already.
More details on Sunday evening. Stay loose! At least it’s not boring!
For charts used in trading or controlling risk, the eye is the instrument. The perception of possible benefit from price movement is not the same for any two of many thousands of participants active at any given moment. There is no magic, no formula that always produces profits, no system that is always right. The Ai may catalog and back test faster than ever, but the market is not a machine. It is a living, breathing being with emotions and motivations all its own; motivations which change depending on whose money is at stake and what matrix of data is being applied. With all of that, it is as predictable as weather, or as groups of human beings may be. It is not random but runs on a calculus of probability that is subject to a sort of quantum “observer effect”. It is not a casino unless you treat it like one. It is a risk exchange for real-world risk that exists naturally and must be dealt with by anyone in the business of growing, handling, shipping, or consuming commodities. Anyone who “rolls the bones” in the futures market without due regard to statistical probability is subject to the same results as in a casino. Some of us can afford the gambler’s approach. Others recognize that it is a business with risk that must be managed. None can expect economic survival if entering the futures market without rigorous limits on exposure. Price charts are the prime tool for measuring this exposure.
MarketBullets® Friday, March 1, 2024: Early AM
USDA Export Sales reports showed 327,300 metric tonnes sold as of Feb 22, a 40% improvement for the week, 15% above the same week last year. Total marketing year sales stand at 18.16 million metric tonnes, 6% ahead of last year’s pace. The bookings included 6 million tonnes of Hard Red Spring, 4.6 Soft Red Winter, 3.7 Soft White and 3.3 of Hard Red Winter. Shipments continue to lag last year’s pace.
The wheat futures market is slowly building a “base”, that is a chart price structure that discovers reliable price levels that large numbers of buyers (or sellers) regard as economically desirable trade points. Once these levels become visible, then there is a technical potential for rising prices from there. The sell side of the equation then finds reinforcement to be more patient, allowing the buyers to bid up the price gradually. It does not require crop disaster or other “Black Swan” events to push wheat prices higher, only good, steady business that consumes wheat, which requires prices high enough to pull wheat out of the hands of producers.
There is no signal to buy here, but there are a number of traders who “have their buying shoes on”, and many are paying close attention to the charts. A rise above $5.95 in May Chicago Soft Red Winter wheat futures would attract buying attention, and a rise above $6.13 would serve as a confirmation of a new upward bias. KC Hard Red Winter needs to see a closing series above $6.37 to confirm, while Minneapolis Hard Red Spring would be positive above $7.10. PNW Soft White wheat needs a boost above $6.50 to claim a confirmation of uptrend. All of these targets are subject to change as the chart patterns develop, but they are fairly reliable inflection points, presently far above the trade, but it can be amazing to see what can happen when the market begins to perceive reasons to buy.
In keeping with a recent emergence of a natural gas price bottom, fertilizer is beginning to rise again after a protracted decline. This can be a good indicator to secure some anhydrous pricing. Don’t let it go to waste.
Wildfires in Texas, in and of themselves are not a market driver, but they may be viewed as a precursor to later dry conditions that may stimulate wheat market interest in adding premium based on crop conditions. It bears observation.
The trendline for wheat remains lower, at least in the 58-day channel for Chicago, which shows trading very near the center line of the downward channel. The Russians will continue to sell wheat at whatever it takes to keep their markets captive. End-users are aware of this, hence the lid on wheat prices. Stay tuned here, as this stuff is trackable. Let’s track it!
MarketBullets® Thursday, February 29 (Leap-day), 2024: Early AM
For Leap Day, the grain futures markets are entering First Notice Day and regular delivery periods for March. The lead contracts are now completely switched over to May (K). The normal rollover has been taking place for the last 2-3 weeks. The spread between March and May contracts was small, only about 3-4 cents, so the continuous front-month charts will not show anomalous patterns as a result.
The May Chicago wheat futures price is sitting right on top of its 57-session geometric mean, on a downward slope since December 6, 2023. All of the work done in rising up from the lows of February 20 have gained less than 25 cents per bushel.
The downtrend is intact, even with the potential of a 1-2-3 reversal bottom. We will monitor the reversal pattern with interest, but not much confidence. At this point there is little to drive the market very hard in either direction.
Stay tuned, it will get more interesting presently.
MarketBullets® Tuesday, February 27, 2024: Early AM
The very short-term (daily) chart in Chicago has set $6.00 in the March futures as the technical target to break out. The little 1-2-3 reversal pattern bears a fairly reliable risk/reward percentage of 65%-70% success, but the return is variable and not large. It is often a harbinger of further upward movement, but we will have to see something more than that minor signal to put much into the idea. For traders, it’s a reasonable short-term signal. For marketers, it is only a “hold” with a defined exit at the initial low, in this case that is the low of Feb 29 at $5.55 March. All of these levels will have to be translated into May futures figures, about 4 cents lower as of this morning’s Mar/May spread.
All of the above may be considered entertainment while waiting for the larger trend to change. It is part of the development of a base, as the market tests and consolidates a price level at which buyers are comfortable taking new positions and sellers become defensive.
As an example of U.S. winter wheat crop progress, the rating in Texas was 46% Good to excellent for the period ended Feb 25, and is about 8% headed. The condition of most of the heart of winter wheat production is steady to improving at far better numbers than the two previous years at this point.
Wheat export sales are about 7% ahead of last year’s pace, but shipments are still lagging about 16% Year over Year. It is expected that the inspections for shipment will catch up.
The trend is paused. There is a possible change heading into the spring weather season. Stay tuned, this stuff is trackable.
MarketBullets® Monday, February 26, 2024: Early AM
This wheat market knows that it does not have to work hard to find wheat for sale, even though country movement, aka “Farmer selling”, has been slowing for weeks. Even with low volume of physical trade at the farm gate, the end-users have been richly rewarded for buying only hand-to-mouth, a pattern that is not likely to change until there is a threat of higher prices clearly established.
Russian and Ukrainian wheat continues to move at an astonishingly consistent and firm pace. It is difficult to imagine farming, selling and shipping under the circumstances of war. Have you checked your field roads for mines lately? The sanctions seem not to have had much effect on Russian grain or oil sales volume. The new batch of economic punishments seem to be of the “declining return on effort” variety. We shall see.
U.S. wheat export sales (Not shipments) are actually up about 6% YOY. There is a reasonably good crop stand about to head out this spring.
The trendline is dull at best. KC, Minneapolis and Paris are each at long-term (2.5-3 year) lows. Chicago, having received some Chinese assistance in late November/early December looks better on the chart, but has had no follow-thru since. What does one do when the price is at heavy lows with no sign of relief? Stay on plan, make the incremental sales on schedule, use the pricing tools when it makes good sense. The sting of selling at or near LT lows is eased by the fact that they are mere increments, and that there remains downside risk that will make the painful sale look good later (as they have done for many months).
Stay tuned, and stay on this channel.
MarketBullets® Friday, February 23, 2024: Chart and Table Update
The week produced a mixed wheat performance. The trend remains sideways to negative, but the upward sparks show that there is potential for a technical rally. Short-covering rallies are often hot, fast and usually short-term, but they can trigger larger moves if there is any kind of supportive fundamental factor. In spring, weather is the most influential. Extended rallies, though require more basis than is currently visible.
More on Sunday night. Stay tuned.
MarketBullets® Friday, February 23, 2024: Early AM
The prospects for northern hemisphere crops; wheat, corn and beans, are swelling slowly but surely. With Brazil’s planting progress for 2nd crop corn and soybeans, there are no fundamental changes that would be anything like what we would have to see to ration forward supply in the futures market. That is a heavy lift for wheat, especially looking into the barrel of the Russian (and Ukrainian) wheat export guns.
We are seeing a nice rally, almost certainly the result of money moving to cover profitable short positions and add longs heading into the “Silly Season” during the next couple of months. All the way through June and on into July the weather forecasters get a workout every day. Early morning trade in Chicago had the front month (March soon to roll to May) at 33 cents above the lows from last Tuesday, the best this market has done on the upside since mid-January. The Present trade is above the mean line for the last 20 sessions, and is less than 15 cents below the 60-day moving average (the trigger line for the Box-o-Rox benchmark – please call for details)…If you are not beating the Box-o-Rox approach, you need to adjust your marketing plan. It is the most basic measurement of performance.
The trendline is downward, in spite of the improved behavior of the last week. Stay on plan.
This stuff is trackable. Let’s track it!
MarketBullets® Thursday, February 22, 2024: Early AM
Some follow-thru in Chicago charts, up 4 at 4 AM. KC and Minneapolis also showing some positives, up 5-6 each. Interest rates are rising, although the Dollar Index has paused in its sideways channel after climbing back to the center of its 15-month range.
Texas weekly crop progress shows winter wheat 15% headed as of February 18 versus 11% normally. Crop readings say 40% good-to-excellent, far better than the last couple of years.
Weekly U.S. wheat physical export shipments are running 17.5% behind last year’s pace as of the week ended February 15.
Most March futures positions will be rolled into May as the new lead contract over the next week. This is a normal shift that takes place every time a contract is approaching near delivery and expiration. Deliveries against futures contracts in Chicago will commence on the first business day of March and run for a couple of weeks until the contract expires.
The wheat market has been a little more interesting for the last few sessions, but no significantly new patterns have been completed at this point. The market may be beginning to add weather risk premium as it does every spring. The northern hemisphere is showing fairly good wheat growing conditions in most areas, although the gentle winter and relatively rich moisture conditions will cause many ag pilots to have a great spring flying on fungicides. The world is not about to have wide and serious wheat crop problems, so market conditions are likely to be tricky ahead, even though the magnitude of the downside risk has been reduced since last fall (There is still downside potential).
The trend is sideways to mildly negative. It will take more work this year to make good marketing decisions than it has been for the last year or two.
This stuff is trackable. Lets track it!
MarketBullets® Wednesday, February 21, 2024: Early AM
Tuesday’s one-day bounce looked like a short-covering rally. There is some confusion about if the funds and other large speculators were the driving force, but there are few alternative explanations. (See “hot-burning and short-lived in the previous day’s comment). The market had become overplayed on one side. Eventually, any market will pause a trend that has been so consistent for so long.
The Chicago charts allow that there might be a change in direction to the upside, but one day does not a new trend make. The base we need to see is at least one successful test of the recent low, followed by a breakout above the early high set Tuesday or very soon after. The 60-day moving average is just above $6.03, 25 cents or so above Wednesday’s early AM trade, without much of a slope. The completion of the 1-2-3 pattern initiated as described above would be the first attempt to turn the market back to positive since at least mid-January.
We need to see some fundamental support to mount more than a hot-shot corrective bounce. This time of year in the northern hemisphere is often a dull season, but the spring weather market is just around the corner, with the spring equinox on March 20th. Meanwhile the market is watching the Black and Red Seas for war inputs, and the southern hemisphere is still providing some market guidance with weather on harvest season.
Until the trend actually is able to verify a new upward bias, the definition remains lower. Stay tuned to this channel for changes.
MarketBullets® Tuesday, February 20, 2024: Early AM
There is just a glimmer of light this AM for wheat prices. Chicago is creating a little momentum with an 11-cent jump. KC is showing 17 cents up, while Minneapolis is up about 7.
It’s the funds and outside markets mostly on the radar screen, covering their short-sold contracts, an activity that always produces some buying interest. This kind of market fuel is hot-burning but short-lived. It can trigger more power for a few days, but is a very tough trading wave. There will be some wheat shaken out of the tree on the rally.
Wheat is in the leadership position, as corn is only up about 1-2 cents and beans 7.
Diesel is a cheerful spot, down almost to the lower boundary of its short-term (48-session) upward channel; just a little more and it will break out and open the door to more technical pressure.
The U.S. Dollar Index is trading quietly near the center of its month-to-date range, still on the strong side, but without creating anything new on the charts.
There are no new factors in the mix. Global exports are slowing, even as Russia and Ukraine both continue to capture a big market share of sales.
Wheat is bouncing off of what appears to be a double bottom with the previous low at the same price range back in November. This kind of pattern historically shows a sweet 73% success rate, but a “mediocre average rise”. Its in the category of contra-trend trades, which are notoriously difficult to capture without injury to the trader, but this can be useful if applied to a good, incremental marketing plan. At least it provides an exit signal on failure of the previous low as a trigger. The trend remains lower, but all trends eventually end. It may be that we are seeing an inflection point. As long as the price remains above the low from last week, it seems logical to try to be patient with new sales. Its way too early to declare.
Stay tuned. There will be more!
MarketBullets® Friday, February 16, 2024: Early AM
Early morning trade in Chicago Soft Red Winter (SRW) wheat was at just 6 cents above the multi-year low printed in the last week of November 2023. Once the futures contract reaches so near a key low, it becomes almost magnetic. If this market turns away from that low in the next couple of days without making a new one, it will be a technical phenomenon called a “double bottom” and would create an inflection point to measure by. If that low fails, it will encourage the money funds to continue to sell, but will also discourage the producers from moving cash wheat. Movement from the country is already dragging. This could crimp it off even more. So this is a moment of some interest and will reveal market tone.
Paris milling wheat has been hammering out new lows, and has now reached under the €200 per metric tonne level, not seen since mid-July of 2021, well before the Russian invasion of Ukraine. Paris represents European milling wheat values and is sensitive to Black Sea exports. It is a key global pricing point, and it is in a strong downtrend.
Diesel is still coming down off of recent highs, but is trading near a 45-day upward geometic mean line. The overall outlook remains upward.
Natural gas is near lows dating back to June of 2020. This key input to anhydrous fertilizer production is helping keep a lid on nitrogen.
The wheat price trend is downward. The duration and intensity of the move since December will require some changes in the fundamentals, which will probably show up first in the charts. We are tracking both. Stay tuned.
MarketBullets® Thursday, February 15, 2024 : Close
Wheat markets all lower on the day. A test of the Chicago long-term low set back in the last week of November just before before the Chinese-sponsored rally is clearly in the nearby. No evidence of an identifiable low. USDA Outlook reports were not surprising but supplied no price positive data or conclusions. There is no specific event or news wire story that is driving this market, just too much wheat available for sale and a lot of spoiled buyers and end users (not to mention a group of confident fund managers holding some sweet-looking short positions. There will be some abrupt rallies, but even a couple of days rallies does not a low make. It will take time to turn such a powerful downtrend. Even a dying dinosaur can hurt you with a twitch of its tail.
Stay tuned. Track this trend. It will pay to be aware and have a plan.
MarketBullets® Thursday, February 15, 2024 : Early AM
“It's like a nightmare, isn't it? ...Just keeps gettin worse and worse.” * The U.S. wheat markets are not alone in their relentless decline. Corn and Beans are in the same rig. Paris milling wheat printed an emphatic new low on Wednesday. France just announced a decline in wheat exports into Southern Europe for the upcoming season based on expectations for Russia to continue to dominate.
The funds have accumulated record net short-sold positions in corn, beans show historically heavy shorts, and wheat continues with significant net shorts. All of this points to a short-covering rally at some future point, but that pre-supposes a catalyst that is enough to spook the aggressive, speculative money managers. They are running fearlessly with no visible threat right now. “Oversold” is a subjective, not-very-specific condition that can last much longer than reason suggests, and then turn in a hot minute. This is not a very tradeable indicator from a buyer’s perspective, but it does provide an idea that when the rally does arrive, it will be swift, strong and temporary. This can be useful to an observant marketer who may be behind on old-crop sales, or under-committed on new crop.
USDA will release a fresh Grain and Oilseed Outlook Thursday morning a 4:00 AM Pacific, 6:00 Central. These reports are just a deeper detailed examination of the WASDE from last week and some discussion of impacts. A good general summary.
On the long-term charts, wheat is definitely within a heavy past price-support zone. The problem with using a decade long data series is that any pattern projections require a very wide error allowance. The primary support zone is $1.00 wide, and the secondary support zone is 2-3 dollars lower. It is possible to be exactly right, but still have a $2.00 per bushel loss before any recovery occurs. For most of us, that is a tough budget item. The LT charts do provide a background piece that strongly suggests that we anticipate some price recovery in the forseeable future, like 12-18 months, but the decisions will have to come within much shorter timeframes.
Tom Cruise does eventually beat the trash-talking Grady at pool. He does not capitulate. Neither should we. Stay on plan. Extend sales into new crop. Talk to your merchant. Stay tuned to this channel.
*Grady says to Vincent in “The Color of Money” (1986 Cruise – Newman movie).
MarketBullets® Wednesday, February 14, 2024 : Early AM
At about 10 PM Pacific Time in the early trade for Wednesday’s session, “Something” happened... The futures market in Chicago dropped 16 cents in about 25 minutes (see top chart on this page), followed by a quick bounce back about halfway from the low point. This is not a crazy move, but it is also a little bit unusual. There was a day when a couple of phone calls could locate the source of such a move, but the electronic night sessions are silent, with orders being placed from dimly lit desks all over the world by a mouse-click or two. Probably some standing sell-stops were hit, adding to the volume (about 4,085 contracts), but it appears to be a wheat-only event. In the same time frame, Kansas City Hard Red Winter (HRW) has printed a new low back to the first week of July, and Minneapolis Hard Red Spring (HRS) has also set a new low. There may be explanations available on Wednesday. It may be a little like driving by that tanker truck on fire by the side of the freeway...never to be heard about, or it may be the first tremor of a larger event.
Random announcements from several government ag agencies and some private estimators show moderate declines in expected wheat acreage in the new year. This cannot be much of a surprise, as the price of wheat has declined several dollars per bushel (as you know, of course). This is exactly what the supply/demand balance is supposed to be doing, adjusting supply to match price. The wheat acreage is not totally elastic, but there are wide areas of “swing acres” that are available to other crops. This is a phenomenon that brings some hope that the long and dismal decline in prices may be finding reason to set a low.
Interest rates are showing a rising tendency.
There is clearly a test of the recent lows and a threat of another range lower for wheat. The trend is lower. The slope is mild, but well defined, and new lows are frequently followed by more new lows.
Stay on plan. Consider extending into next year with some coverage. Stay tuned to this channel. If the trendline changes, we will see it.
This stuff is trackable. Let's track it!
MarketBullets® Tuesday, February 13, 2024 : Early AM
Chicago Soft Red Winter (SRW) wheat futures are technically about as flat sideways as they ever portray. The 60-day moving average, the 30-day median price and the 93-session geometric mean are all within a dime of the current trading price. Flat. Kansas City Hard Red Winter (HRW) and Minneapolis Hard Red Spring (HRS) ar in the same pattern. Paris Milling wheat is weaker, with a low last Thursday dating back to mid-July of 2021.
Chicago futures are now trading nearly on par with Kansas City front month futures with a sharp trend toward a discount, a relatively uncommon relationship seen only about 30% of the time since the mid-seventies.
On balance, the money funds are still selling wheat, as well as corn and soybeans. There is little to threaten their positions, but they will become more sensitive as the spring and early summer weather season approaches.
In spite of concern about low export prices, the Russians are considering expanding their sales beyond their previously set quotas, with another large crop anticipated ahead.
From Grain Central, Tuesday February 2024: “Rather than taking the quickest route, navigating directly through international waters to the Bosphorus Strait, vessels hug the coastlines of Ukraine and North Atlantic Treaty Organisation (NATO) members Romania, Bulgaria and Greece, escorted by the Ukrainian Navy. Sailing through NATO waters provides extra security, and the new corridor does not require the laborious and slow inspections Russia required under the previous deal.”
The trend is holding sideways, but has established some support lines, the failure of which will almost certainly trigger more vigorous selling energy. For Chicago (technically the strongest contract) the selling tripwire is around $5.83 with a confirmation at the January low at $5.73, about 20 cents below current trade. KC’s line is $5.87 (9-10 cents below current), and Minneapolis is $6.79, about a nickel below very early Tuesday trade.
Stay on plan. Make the scheduled sales, both old and new crop. The price outlook is negative until a visible shift occurs on the charts, which we will see when it comes.
MarketBullets® Monday, February 12, 2024 : Early AM
Even the Russians are fretting about low global wheat prices. They have increased export taxes and appear to be considering slowing sales to relieve negative price pressure. Vladimir may be chuckling into his Stolichnaya as he contemplates the future prospect of his ability to influence global food prices with future expansion of control of wheat production areas in Ukraine.
Part of this week’s quiet is due to holidays in China and Brazil.
The U.S. Dollar Index continues to increase within its 14-month sideways channel, but is not more than a minor influence on global competitiveness of U.S. wheat.
USDA will be releasing its Wheat Outlook Summary on Monday, a statistical review that is not a carrier of market surprises, but a sober look at fundamental market trends. It’s pretty dry reading, but it is quick and helps in setting background colors.
On the whole, because of improved moisture, U.S. wheat growing conditions are better than they have been for years.
If there is a market rally in the next 60 days it will be mostly driven by weather-based uncertainty, but that is a slender reed. The charts do not show any tendency to bounce more than 50 cents without a powerful factor that would be obvious if it showed itself.
Until there is a change in market tone, holding wheat in storage without price coverage is likely to be an expensive strategy. It is time to be close to your favorite merchant, discussing forward sales and clearing out old crop in the bin. The wheat price environment is going to be challenging in days ahead.
This stuff is trackable. Let’s track it!
MarketBullets® Friday, February 9, 2024: Early AM
As for the February WASDE is concerned”
The outlook for 2023/24 U.S. wheat is for stable supplies, lower domestic use, unchanged exports, and higher ending stocks. Projected ending stocks are raised 10 million bushels to 658 million.
The global wheat outlook for 2023/24 is for increased supplies, consumption, and trade but lower ending stocks. Projected 2023/24 ending stocks are lowered 0.7 million tons to 259.4 million, the lowest level since 2015/16, on decreases for India, China, and Ukraine.
StatsCan’s Grain Stocks report as of year-end 2023 put wheat stocks at 20.68 million metric tonnes. The average pre-report trade estimate was on the money, with a 10% YOY decline.
This is not the kind of refrain that causes the crowd to stand up. It does release any planned sales that had been paused by money managers or other aggressive entities pending the reports.
Failing other developments in the meantime, the next USDA data outside of the March WASDE release will arrive in late March in the form of a new Planting Intentions report, featuring corn and soybean acreas. The “sister grains” have not provided any cheerful market energy of late, with Chinese buyers being cautious, and large Brazilian/Argentine crops for sale. The prices of corn and beans can provide color to the background of wheat markets, but just now that color is gray.
Wheat has had a long, 21-month drop, in which Chicago has given up $7.00 per bushel since May of 2022. KC Hard Red Winter (HRW) cashed in $7.82, Minneapolis Hard Red Spring (HRS) dropped $7.29, and PNW Soft White Winter (SWW) is $5.45 below that same May ’22 point. Looking at this is a little melancholy, but the bright side is a potential 38% bounce (the smallest realistic ratio), is a solid chunk of gain. For example, SWW should consider what a $1.50 TO $2.00 per bushel rally could do for the attitude. The only bug in the soup is that it’s likely to take time. There should not be any expectation of a six-month move without a crop failure.
The USDA report was a dud as far as positive wheat price trends go. The sideways to negative trend channel abides.
This stuff is trackable. Let’s track it!
MarketBullets® Wednesday, February 7, 2024: PM
The wheat market is set, the tripwires are taught and the bait is laid out. The hunting has been sparse lately and the trade is hungry for a move. Thursday’s World Ag Supply/Demand Estimates may be the only game in town. There will be scrutiny of global and country production estimates and wheat balance sheets. The market reaction may be energetic or tepid depending on how the pundits and money funds perceive the data. Producers and merchandizers are mostly observers, although there are always bills to pay, so some wheat will move. Meanwhile the price is unlikely to break out of recent ranges until the reports are released at 9:00 AM Pacific time, 11:00 Central on Thursday. By 9:30 PST the story will be told and absorbed into history. Sometimes its these reports that catalyze trends. No we wait.
Stay tuned, Wheaties!
MarketBullets® Wednesday, February 7, 2024: Early AM
Chicago is below its 60-day moving average, with the slope horizontal. Not a trending market. The USDA report Thursday morning sees many traders willing to stand aside in such a bland market. Country movement of wheat is at low levels even with plenty of stored, unsold wheat available. The most visible upside futures target in Chicago March contracts is about $6.50, the high of the first week of December, immediately following the strong series of export sales of Chicago Soft Red Winter wheat to China. It will take a factor not currently visible to pull wheat up the 55-60 cents per bushel above current trade to hit that level.
Wheat growing conditions are decent and slowly improving in the U.S. with adequate moisture in many areas that had been missing for a couple of years.
Chart base-building can be a tedious business, but the size of a proportional retracement to match the massive downward move from the all-time highs of March-April-May of 2022 requires a wide base. Positive factors will emerge.
There is still downside risk for wheat prices, but that has been reduced over the last 21 months of trade (see long-term chart <here>.
Stay warm. Stay loose. Stay tuned.
MarketBullets® Tuesday, February 6, 2024: Early AM
Take a look at the “Camshaft pattern” range. That is our breakout channel. Once the market escapes this range the odds of continuation get a little higher in either direction.
U.S. wheat export shipments for the last week brought the Year-to-Date total to 11.27 million metric tonnes versus 13.8 million tonnes last year, about an 18% lag YOY.
January USDA World Ag Supply/Demand Estimates (WASDE) and Grains: World Markets and Trade reports will be released on Thursday morning 9:00 AM Pacific Time, 11:00 AM Central. The market will be likely to hold back on trade volume just before the report, then accelerate afterward. If there are surprises (figures that vary significantly from aggregated pre-report trade guesses) the markets react quickly to account for the differences. This is a game that is played every month. Once the adjustments (if any) are absorbed, then prices move on, sometimes only a few minutes after the report. Occasionally the WASDE or other USDA reports provide the catalyst for major market directional shifts.
The wheat prices of the major markets are in a sideways pattern. Tracking the breakout will yield ideas for the next phase.
MarketBullets® Monday, February 5, 2024: Early AM
For the sixth session out of the last seven, Chicago wheat futures are at the bottom of the recent range, once again looking for support. This incessant pounding on support is a classic “barbarians at the gate” kind of setup. There is little to do but wait to see if they crack the door. If the price penetrates below the range (only 5-10 cents below very early trade on Monday morning) then there is another branch at $5.73-$5.77, the old 78.6% ratio retracement line which was reached January 16th. These are the classic “support zones” at w which enough buyers were revealed to turn the market back upward.
It’s a waiting game.
The Dollar Index is rising, now back to December levels, having bounced off of previous well-defined support dating back to the end of January. The Russian Ruble is weakening, making their wheat less expensive in dollar terms. Russian Urals crude oil is trading less than $10 below Brent crude, the strongest pricing for Russian oil since the Ukraine incursion began. Interest rates for 30 and 10-year notes are pulling back lower, still in the context of a very large upward move since December of 2020. This batch of data is mildly negative for wheat prices.
On a brighter note, Diesel prices are declining for the last 6 sessions, although it remains within the 37-session upward stat channel. This has little direct bearing on wheat, its just nice to see at the pump.
The trend for wheat is not positive, but is obviously seeking some kind of pause, if not a low. There is still room for more downside. Make incremental sales on schedule if you have not already accelerated. When the bounce comes, it may be strong, but we can never know when or from what price it will begin. Call your merchant and discuss price floor strategies that may allow some open upside in the event of a rally. Meanwhile, stay tuned. There is always more!
MarketBullets® Friday, February 2, 2024: Close
MarketBullets® Thursday, February 1, 2024: Early AM
Friday early AM trade shows a positive start toward net weekly gains for all three U.S. domestic futures contracts. PNW White wheat is seeing a little more interest from overseas buyers, which coupled with slow country movement could be a supporting factor for the sleepy Portland white wheat traders.
No change in trend, although after midnight trade in Chicago front month futures was back above the “Box-O-Rox” 60-day moving average (the arbitrary trigger line that suggests slower sales when the price is above and faster sales when the price is below the line). This is not a signal for speculators, but an indicator and strategic operand for cash sales activity. Call for more detail.
Next Thursday morning we will see the February release of the World Ag Supply/Demand Estimates. If there is any debate it will be about production in the southern hemisphere. There are ideas on the street that Australian wheat is doing better than earlier projections on timely rains. U.S. domestic balance sheets should not be experiencing any dramatic adjustments at this juncture.
The wires are quiet – too quiet. We should be hearing more noise, at least from the crickets. All of the apocryphal stories about Bigfoot speak of “that time the woods went silent”. Or maybe we are just displaying cabin fever. Meanwhile the wheat market tone is a bit better.
Stay tuned. If something changes we will see it.
MarketBullets® Thursday, February 1, 2024: Early AM
Wednesday evening’s close in Paris Milling Wheat futures saw a new long-term low dating back to July 26, 2021. This contract has become the canary in the mine for bread wheat prices on the European continent. The bulk of Russia’s wheat is also higher protein “bread wheat”. Due to the sanctions on banking and insurance, Russia’s “Black Sea” wheat must trade below the regular price, although the discount has be reduced over time. China receives a large proportion of Russia’s wheat exports, but India, Egypt and Turkey all are regular customers. The reality is that if Putin is able to gain control of Ukraine’s food crops, energy production and even uranium mining, Russia’s influence in global affairs will expand considerably. In the long run, Russian and Ukrainian wheat hectares will be aggressively farmed with or without Putin, pushing a large proportion of all global wheat export sales. For now, the amount of wheat leaving Ukraine is significant, and while mildly astonishing under wartime conditions, it will expand in the future.
The trend in wheat is weak, with lows still in the future. When those lows will emerge on the charts, with fundamental data support evident, it is not today.
This stuff is trackable! Let’s track it!
MarketBullets® Wednesday, January 31, 2024: Close
Wednesday brought more flopping about, with declines taking back most of Tuesday’s gains. The Chicago front month futures are still within recent range boundaries. No change in trend direction or intensity…flat to negative.
BAGE (Buenos Aires Grains Exchange) reports completed wheat harvest of 15.1 MMT, 3 million metric tonnes below the original projections. This is 24% above last year’s drought-hit crop. Now we will see what the new administration will do about export taxes.
Ukraine is expecting total exports for 2023 at 17.7 MMT for Ukraine, a 3% increase YOY. Increased export capacity off of the the Danube river Romanian ports, accounted for the increased figure.
MarketBullets® Wednesday, January 31, 2024: Early AM
In the Eastern PNW wheat country, this year’s weather data to date is predictive of stripe rust. The Walla Walla County Extension News publication has a thorough article including vulnerable varieties. Phone: (509) 524-2685, Email: dmoberg@wsu.edu.
At the close on Tuesday, the Chicago wheat futures market was up 5 cents per bushel for the week so far. KC Hard Red Winter (HRW) was up 3 and Minneapolis Hard Red Spring was down 4. After midnight and into the early AM session for Wednesday, all of the gains were given back plus a few cents, and Minneapolis was off another 6 cents. Directionally this market is hunting a narrow range and waiting for a leading factor to emerge.
It’s month-end, so the funds that have built a large net short-sold position in all of the grains may move to close out some profitable positions Wednesday, which may be the only positive influence available for the moment. Multi-year lows, stable if not improving production wheat weather in the northern hemisphere and a stronger dollar…a recipe to promote caution in buyer’s minds.
This is the time to stay on plan, making the incremental sales on schedule and trying to disregard “confirmation bias”, in this case the tendency to see only positives and avoid looking at negatives. “How low is low?” is a question that is always answered after the fact. Meanwhile, the trend is weak and flat in some wheat markets and downright negative in others. Stay tuned for further developments, even if it’s only a few minutes at a time!
This wheat market is beginning to cause stress for some hard-working folks; market observers and commentators. Standup comedians or glib politicians they are not, but the audience expects fresh, intelligent and entertaining content every day, and lately there has been only the scrapings of the empty barrel to power this ongoing effort to edify and amuse readers. It also does not help when the price is consistently flat or negative for weeks or months on end. This is historical fact: most of the time, the market is not really doing much of anything. The problem is that when the market does act, it is worth money to know it is on the move. This requires vigilance all the time, even when it is dull. For a marketer of wheat, knowing when things change takes only a few minutes each day, but the market reporter is charged with maintaining a constant state of alertness to make that rapid scan possible. Have pity on the poor fools. Buy ‘em a sandwich and tell them what works for you. They will respond!
MarketBullets® Tuesday, January 30, 2024: Early AM
Argentina is preparing to vigorously export wheat once again, after a decades-long pause. The only problem is that their new conservative government is planning to fund itself by taxing those exports. This will be instructive to watch. Meanwhile China has smoothed the way for Argentinian wheat imports, a development of which U.S.-based exporters have taken a dim view.
Wheat importers have yet to be punished for buying hand-to-mouth. There is no salient reason to purchase aggressively ahead when the market has such a clear-cut downward bias. Why ration supplies in an environment of abundance?
U.S. total wheat shipments to date have reached 10.99 million metric tonnes versus 13.2 million by the same date last year, a 16.7% lag.
The U.S. Dollar Index has spent the month of January rising and has gained 2.3% month-to-date. This is an indirect price factor, but does affect wheat export volumes over time, as it makes U.S.-origin wheat that must be paid for in USD more expensive (less competitive).
Farmers in France, the EU's biggest agricultural producer, say they are not being paid enough and are choked by excessive regulation on environmental protection. See Reuters article <here>.
Paris Milling Wheat has printed a new 2.4-year low on Monday. The negative trendline there is consistent and persistent. They are vulnerable to cheap Russian wheat available in their backyard.
Corn and soybeans have both printed vigorous new lows in the last few sessions.
This trading environment is conducive to capitulation, an infamous condition under which cash sellers become resigned to selling at undesirable prices (usually occurring at long-term lows). There is no guarantee that if a low is identified a rally will ensue. It may take quite a while for prices to bounce to any significant amount. Holding cash in the bin is an expensive way to speculate when compared to well-known strategies that allow at least a partially open upside while establishing coverage against continued downside risk. If you are uncomfortable with the ongoing downward stress, call your merchant for perspective on alternatives. If nothing else you will know the short-term path ahead in greater detail.
The trend is sideways to negative. There is no buy signal known as “because its cheap”. Lets be deliberate in action and thoughtful in reaction.
It’s trackable. Let’s track it! Stay tuned.
MarketBullets® Monday, January 29, 2024: Early AM
Cents USD per bushel (As of the week just ended on January 26, 2024). Figures are approximate.
Market _ __Last Week MTD
Chicago SRW: +7 -27
PNW SWW Mar’24: -5 -20
KC HRW: +19 -16
MPLS HRS: +7 -19
Paris Milling: -9 -23
Corn +1 -24
Soybeans -5 -83
After midnight trade Monday shows a weak market, with Chicago down 8 cents, KC off 12, and Minneapolis down 7. We are now nearly back to last week’s lows, still inside of the range that has contained the wheat prices for many weeks.
Old crop Hard Red Winter (HRW) and Hard Red Spring (HRS) are moving towards “inverted” configurations with nearby deliveries paying more than later time periods or new crop. There is still quite a bit of unsold wheat in storage around the country, but markets have dropped enough to slow country movement considerably, forcing end-users or exporters to pay a little more to fill obligations. On the back side, improving growing conditions are causing new crop bids to lag, as later supplies are shaping toward an expansion of wheat available. This behavior is a background factor often associated with upward-biased trends, but it is all we have to cling to at the moment.
The only futures market with any positive look at all is Chicago, and that is within a long-term negative channel, but even with this generally uninspiring aggregate, the wheat markets are mostly lower-to-sideways, having achieved only small declines over the last four months. The normal seasonal lows are over-due, and the price of wheat has dropped enough to suppress production (acreage declines in wide areas). There is no looming supply problem from weather or government policies. The market lacks a positive mandate to move toward price allocation of supplies…it’s a buyer’s market. The wheat price will rally from some future low point. It always does. But it could take a while to play out.
So what are reasonable strategies for a wheat producer who must work at liquidation every year? In the long run it is watching trendlines and trying to be patient if wheat is moving upward and impatient if it is moving downward, incremental sales all around the calendar on a set schedule that can be modified according to defined parameters, like a positive or negative trend determination, and working with an array of price management tools, as in Hedge To Arrive (HTA) or other option-based programs that allow flexibility.
The most basic of perspectives is to know the trend. It only takes a few minutes a day of observation to know when changes are afoot. If you know what you want to do before those events emerge, then it becomes a much simpler problem.
This stuff is trackable. There is no magic. Let’s track it!
MarketBullets® Friday, January 26, 2024: Early AM
Wheat futures eased into the Friday session after midnight with a timid tone. Chicago front month contracts were down about 4-5 cents, just enough to put the brakes on the upward challenge of the intermediate resistance level between $6.17 and $6.21 in Soft Red Winter (SRW). KC Hard Red Winter (HRW) a bit stronger, at minus 1½-cents, while Minneapolis Hard Red Spring (HRS) was in-between at minus 2-3.
Some of the wheat price dullness is coming from weak corn and soybean patterns. Wheat may diverge from the sister grains, but each of the trio rarely moves very far or very long from the other two.
All-wheat exports are still lagging last year’s sales pace by 10%, although there has been some improvement over the last couple of weeks.
The KC/Chicago spread has seen KC lose 77 cents of its premium over Chicago since last September, as the battle in global markets has been fought between Russian milling wheat, Paris and KC, with KC struggling to compete, while Chicago has benefitted from a string of Chinese buys. PNW white wheat has been following the futures crowd with lows around January 16 and a recovery of about 20 cents into current levels and an uptick of buying and rumors of buying in the last week. The all-wheat big picture trend is still negative, but the last 10 trading days has allowed some air back into the wheat price tires.
There is a mild whiff of potential gains in the air, just enough to prevent capitulation on down days. Chicago is still the most followed market in the world, and it is parked right on top of the 81-session, positive-sloped mean line.
Global crop regions with current crops suffering drought or moisture excessive enough to shift grain balance sheets have declined in size and number, and those that had been dry in the southern hemisphere are recovering. At this point weather does not seem to have the price-driving power to move the wheat market upward. As the spring emergence season looms in the northern hemisphere there is always crop condition risk, but currently this does not read as a major probability.
Wheat is pushing into the weekend without a mandate. The newswires are in standby mode and “There’s hamburger all over the highway in Mystic Connecticut” (Firesign Theatre, 1970).
Its trackable…Lets track it!
MarketBullets® Thursday, January 25, 2024: Early AM
The Ukrainians continue. Never underestimate a Ukrainian. Bloomberg article <here>.
The wheat market in the wee hours of Thursday is up a few cents trading quietly. It has regained a mild upward tilt and is once again challenging previous price zones that discovered selling pressure. Chicago March futures are trading about 40 cents above the lows printed six sessions ago on January 18. The weekly trend channel remains negative to flat. Chicago is presently the wheat market leader. Paris Milling Wheat is in a weak pattern, trading under its 129-session mean line.
Iran appears to be doing its best to inflame the entire Middle East by proxy, and even some direct actions. Medical supplies and food are due to be distributed in Gaza, where hospitals are out of anesthetics and other key supplies.
Stay tuned
MarketBullets® Wednesday, January 24, 2024: Close
Wheat is going to be re-appearing in ag headlines as it is attempting to break out to the upside. One very small clue was a jump in trade volume in Chicago March contracts in the last 30 minutes of Wednesday’s trade session. Normally of late, these little volume spikes have been occurring in the First 30 minutes. This is just a minor blip to notice that suggests a change in decision making has occurred among some buyers…Funds, Commercials…? Just a little puff of breeze.
Russian crude oil has jumped in price, apparently due to a couple of drone strikes in a Leningrad, Russia regional oil facility. No major damage (so far), but this is a precedent. A week ago, Russian Urals crude was trading at about $17-$18 per barrel below Brent, the North Sea origin benchmark contract. The last couple of trade sessions have seen Urals now about $9 below Brent (See Crude oil chart <here>). Russia has been very aggressive in pricing their crude as well as their wheat into global markets in recent months, capturing a significant market-share in a wider band of business outside of their traditional buyers despite sanctions.
This may be viewed as a little peep into the future for competitive global trade in food and energy, two of Putin’s most influential weapons. BTW, Ukraine is the 11th largest uranium producer in the world…just sayin’.
Wheat is working on some technical patterns that look positive in the making. The trend channel is still negative, but this is a good time to be paying attention, as the nearby futures in Chicago have moved back above the 60-session moving average, a Box-o-Rox signal to “delay or hold incremental sales” (Not a speculative-style signal, just a “slow walk” on planned sales of physical wheat. Call us for more information about this crude, but effective indicator.
MarketBullets® Wednesday, January 24, 2024: Early AM
Chicago has begun to show a potential pattern of upward reversal, with a (maybe) higher weekly low last week at $5.73 in the front futures month than the previous low from the first week of December at $5.27. Now we need to see a higher weekly high, at or above $6.50. KC Hard Red Winter (HRW) is not displaying this potential, as the recent low last week was the lowest it has traded since mid-July of 2021. Minneapolis Hard Red Spring (HRS) is also not participating in this pattern, nor is Paris Milling Wheat, so Chicago is a possible leader, or maybe a mis-leader… At least we have a whiff of change from relentless selling.
It seems like maybe we will have to rely on our good friends in the managed money sector to provide buyers, tapping some relatively big net short-sold aggregated positions. They have no trigger at the moment. There are profitable positions on the books, so month-end may produce some buyer energy.
This may be just a case of “seller exhaustion” along with buyers just plain tired of being beat up.
Expectations for slightly smaller U.S. spring wheat acres to be planted are emerging, with one agency, “S&P Global” estimating 100,000 acres less than last year. Canadian acres projected to be smaller as well, but in both cases, early ideas of yields are anticipated to improve more than enough to overcome the change.
The wheat and other grain markets are stabilizing a bit after an exhausting couple of weeks. The trendlines for wheat are tilted slightly lower, as evidenced by new long-term lows printed last week in all but Chicago. Market tone is quiet. Marketing wheat in this kind of environment is somewhat unexciting, with incremental sales executed without urgency. There is a defined range that provides some guidance…hold and sell a failure of the lows can make some sense. Its best to write out any reasons to deviate from planned sales.
Stay tuned! Its trackable. Let’s track it!
MarketBullets® Tuesday, January 23, 2024: Early AM
Chicago wheat has seen impulsive behavior on downward sessions followed by grinding steps back upward, a pattern favoring the downside. The technical power is still on the negative side, although the most recent 4 trading sessions have produced a 15-cent improvement from the low on last Wednesday back up to January 16 levels. It is hard work for that amount, but it did validate the 78.6% retracement level of the move down from December 6, which was a low-energy pattern with a flat to mild negative slope, a sign of a market approaching “fair value”.
The market is uneasy about the steadily widening war in the Middle East. Ukraine and Russia are not close to any political solution, as it seems that Putin is confident that he can win domination of Ukraine by simply hanging onto a “slowly bleed the opposition to death” strategy…no need for dramatic advances, just wear them down (no matter the cost). The nearby effect on the global wheat market is price-positive, and the long-term effect of resolution, no matter who prevails, is price-negative, as all of the acres in Ukraine will be back in production without barriers to selling into a global market and the sellers will be highly motivated.
For now, the wheat price trend is nearly flat, with a slight negative slope. It is the chart base for any significant move upward under construction. Its time frame for completion is likely to be in proportion to the historical upward and downward moves of the last three years, as will be the potential upward retracements that emerge in response. It will test the marketer’s patience and skill.
The lack of hard-driving factors in the environment allows a quiet period before the spring dormancy break in the northern hemisphere, but for the sake of good marketing, it is valuable to track the trend so as to catch the shift into a higher momentum market when it arrives. No worries, it will come and it will be trackable. Stay tuned.
PS there is an interesting ETF called “WEAT”. Take a look at it Here.
Stay tuned. This stuff is trackable! Let’s track it!
MarketBullets® Monday, January 22, 2024: Early AM
Wheat Market * ___Last Week MTD
Chicago SRW: -3 -35 (-5%)
PNW SWW Mar’24: Unch -20 (-3%)
KC HRW: -10 -35 (-5%)
MPLS HRS: -3 -27 (-4%)
Paris Milling: -6 -13 (-2%)
Corn -3 -25 (5%)
Soybeans -12 -78 (-6%)
*Cents USD per bushel (As of the holiday-shortened week just ended on January 19). Figures are approximate.
This Chicago Soft Red Winter (SRW) wheat futures market is working hard to set up a base at the ratio-retracement support level at $5.73-$5.76 for the front month contract. Very early trade Monday was slightly lower, making it about 15 cents above the support level. It is a thin reed to lean upon, since we have seen this market sinking through every previous price that had revealed buyer interest in the recent past. The risk on the downside will expand if the market cannot hold above the price range.
On the positive side, if the contract can sustain the very short-term upward move (based on market confusion, currency value changes or continued expansion of Red Sea-Suez limitations on bulk shipping, the upside target range is about $6.39-$6.49, or about 50-60 cents above early Monday trade levels, followed by an attempt above that into the $7.00 level, but that is a stretch without some fundamental support.
The trend since December 6 is still negative.
The Suez Canal between the Mediterranean Sea and the Red Sea is one of the strategically valuable “Choke Points” for international shipping. Another key passage is the Turkish Straits between the Black Sea and the Mediterranean by which large numbers of vessels pass with bulk and container cargoes into Asia, Australia and India. The alternative routes are much longer and more expensive. Presently bulk cargoes of wheat have not been dramatically affected, but the trend in the Middle East conflict(s) is still to grow wider and more diversified. The Russian invasion of Ukraine has taken a lower position in the news flow for the moment, and it seems that Ukraine is going to continue to export as much wheat as they can while they can.
There has been an uptick in U.S. export sales numbers in recent weeks, but it remains to be proven that this is a reflection of market pressures or just normal demand in the season. China remains a buyer of wheat for this period, which has already supported the U.S. price markets and may do so again, although perhaps not as vigorously as the first series of buys in late November thru early December. Total U.S. wheat exports are at the lowest we have seen since 1971-72. The world has wheat coming from all directions.
PARIS, Jan 17 (Reuters) Among the 12 wheat cargoes that have left France for China since last month, five travelled through the Suez Canal and Red Sea, while seven chose the longer route around Africa, including two that had turned back in the Mediterranean, LSEG shipping data showed.
FranceAgriMer in a supply and demand outlook slightly lowered its forecast for French soft wheat exports outside the European Union in 2023/24 citing lower demand from China and Black Sea competition in Egypt.
MarketBullets® Friday, January 19, 2024: Early AM
New long-term lows for wheat are still being printed every week. The U.S. Dollar Index has recovered nearly all of December’s decline, making U.S.-origin goods more expensive in an inflation-weary world. The world is also uneasy about the trend toward wider and more committed war in the Middle East, as we see the traditional fractures among the Muslim countries emerging from the heat of the tragedy in Israel and Palestine. Global trade is being stressed, as the Red Sea and potentially the Persian Gulf “Choke Points” are vulnerable, threatening the flow of crude oil and other essential trade. Markets do not like instability, usually responding negatively.
The negative trend in wheat is not yet completed, but at this point the risk for buyers has been reduced substantially. The change to a positive slope will emerge, and it will be visible on the charts. The challenge of deducing the future price amidst the “wars and rumors of wars” is always stiff, but this is not the first time we have seen such pressure on world markets. It is absolutely essential in this environment to track the market and reduce exposure to price risk in any way available. Waiting for a rally is not a strategy, it is a high-risk position. One only has to study the last 3-4 years to see what can be missed by holding too long. Call your merchant and lay out a plan for new crop sales, as well as old crop clearance. There are ways to cover risk without forfeiting potential.
Stay tuned. This stuff is trackable! Let’s track it!
MarketBullets® Wednesday, January 17, 2024: Early AM
Andre Sizov, in “The Sizov Report”, writes: “The competitiveness of Russian wheat compared to European suppliers has diminished. SovEcon estimated the price of Russian wheat with 12.5% protein at $244.5/MT FOB at the end of last week, while French 11% wheat was offered at $243/MT, $1.5 less. Two months ago, Russian wheat was $18 cheaper than European wheat.”
Is that good news? It depends on what you want to see. For wheat sellers, it is not great. Lower global prices, although eventually stimulating to demand, are reflected quickly in cash bids across the country. For those who recognize that Ukraine’s ultimate success or demise will lead to more wheat entering the world markets that what is coming today. That is a long-term price negative. For leaders who must feed their populations to prevent dangerous food riots and potential political revolution, it is great news. A successful “Special Operation” in Ukraine makes Putin potentially a great ally for importing nations through the use of this “Food Weapon”. This is also true of energy supplies, but that is a story for another day.
The wheat market is steadily bleeding into very long-term price lows. In the very early Wednesday AM trade, Chicago wheat was trading quietly, within the bottom trade range of Tuesday’s negative 14-cent session. If applied to front-month charts, the price has tapped the 78.6% retracement level and hesitates to break lower on Wednesday morning. This is a very short-term view, not useful for marketing, but fascinating as part of the study of market trends. The market is portraying profound weakness, with new multi-year lows in Paris Milling Wheat futures showing why Russian sales have slowed. U.S. cash bids have spiraled into a movement-killing low range. This is a setup for a bounce, but a short-term rally is only good for part of the marketing effort. Longer-term it will be weather and global political/economic stability that allows more wheat to be purchased and eaten.
Holding wheat in the bin has cost many producers lots of money in the last year. A prudent sales effort is at least partly based on incremental sales and deliberate attention to the footprint of the beast we pursue…the price charts. Chicago wheat is below the “Box-o-Rox” indicator (60-session moving average) which triggers a “maintain or accelerate incremental sales” signal. Simple? Yes. Can be improved? Yes.
The trend is near a technical tipping point, under which there is room for more downside. Somewhere along the line will come a recovery. We have to wait and see it emerge. Capitulation is when the majority lose hope of higher prices and resignedly sell without regard to indicators, smart-ass commentators, or what the 8-ball says. That can be avoided with a little study. Stay tuned. Track it!
MarketBullets® Tuesday, January 16, 2024: Early AM
On Friday, front-month Chicago March Soft Red Winter (SRW) wheat futures settled down 7¾ for the day after bouncing a dime off of some new lows dating back to November 30 of 2023. KC Hard Red Winter (HRW) wheat futures were relatively stronger, up 2 cents in nearby delivery contracts, while Minneapolis Hard Red Spring (HRS) wheat futures were near unchanged, down ¾-cent. Monday saw Paris Milling Wheat futures were open and trading down to lows not seen since July of 2021.
Corn and Soybeans both were negative leaders on Friday, with corn front-month contracts down 9 cents and beans down a dime, both hitting sharp new 3-year lows.
Tuesday very early trade has Chicago started with a pop, up a nickel, but faded to unch by 3:30 AM Pacific Time. KC and Minneapolis followed similar patterns. The new week opens with a pair of fives, on a minimum bet.
Some of the behavior of wheat futures was in sympathy with corn, which received a market-beating on a minus 9 cents and a session low dating back 3 years to late December of 2020. Soybeans are also in a negative slope, thumping down to a low Friday that is part of a series of lows dating back to June of 2023. A collapsing corn and soybean market is a drag factor on wheat, helping keep a damper on price rallies, beyond the usual technical boundaries. For marketing it’s a bit unreliable as a timing tool and serves better as a background factor.
As negatively as Chicago wheat behaved on Friday, the USDA reports were not as sour as might be assumed given market behavior, and were the only grain in the report to actually show some mildly positive numbers. U.S. All-Wheat Domestic carryout for this marketing year was reported at .648 billion bushels, versus the average pre-report trade guess at .658 bil, not a price-negative number. Global all-wheat carryout came out at 260 million metric tonnes, versus a pre-report average idea of 258 million tonnes, a mildly negative non-surprise. U.S. All wheat Stocks in inventory showed 1.41 billion bushels versus an average 1.387 guess, not a big miss.
Winter wheat seeded acres were pegged at 34.425 million acres, below the average pre-report estimate of 35.786 million and below the low end of the range of guesses.
Overall, the wheat price reaction to the report suggests little fundamental price damage, but no inspiration either.
The winter weather should not be a surprise to the market, and much of the wheat did catch a little snow ahead of the cold winds. The market may want to add some risk premium, but on balance, moisture is more important no matter how it arrives. This looks like a mild, short-term positive with less than dramatic effects on the wheat price longer-term.
Many times, USDA reports are not immediate price drivers, but function as a “brake-release” as they are always potential triggers, but once they become public the threat of surprise is removed and the trade moves on very quickly. Within a few days, this report will be completely absorbed and forgotten.
The wheat price trend emerged from the formidable January USDA data dump with no urgency, still clinging to a slender positive tilt almost entirely due to a series of Chinese SRW purchases in the first half of December. If there is no support from winterkill reports or war-related supply chain problems, this market is suggesting more flabby behavior, at least in the nearby.
BTW, in the PNW, there are about 210,264,000 bushels of stored wheat (all varieties) still sitting in the bin. Prices since the first week of August have declined about 50 cents for white wheat. Without calculating what proportion of those stored bushels are white wheat, it is still distressing to see a $105 million price loss for the region. Lets see about tracking the market a little more vigorously and reduce exposure in negative markets, eh?
This stuff is trackable! Lets track it!
MarketBullets® Friday, January 12, 2024: Early AM
USDA Report Day Friday 9:00 AM Pacific Time, 11:00 AM Central. Until that is released there is not likely to be large volume of trade or price movement. “The trade” means all of the market participants at any given time.
The price we see on our computer screens is generated by aggregating thousands of real money decisions to buy or sell, moment by moment, through the trade session. All this data is gathered in real-time and blasted out into the world by an electronic system of marvelous complexity, yet the conceptual core of the driving flow is reliable and honest due to its simplicity. Each trade posted represents one buyer and one seller. If more buyers press bids than there are sellers to match with offers, the price rises until it is attractive to enough sellers to balance the demand with supply. If there are more sellers than buyers then offers fade lower until the price is low enough for buyers to take action. In time, the process yields thousands of price-dots, each an identical agreement for physical delivery and acceptance, which become a moving, printable river of very public data. The thing has not fundamentally changed since its inception because it is elemental, irreducible, atomic. Buy or sell, transparent and available to anyone interested, whether that is a farmer with a binful of grain that he must sell, a chicken feeder who requires a reliable source and fair price for feed, or an international trading company wishing to reduce the risk of product price fluctuation upon having made a commitment to load a vessel or receive one in the future. The perceptive speculator finds a vital role, adding fluency and liquidity to a market that would become sluggish and difficult to trade if only those whose interests are physical were engaged. There is always a willing buyer or seller available at need, and the price is always public.
The futures market is large and transparent, difficult to consistently manipulate. For example, if a very large buyer quickly bids the price up aggressively over a short period to acquire a dominant position of ownership, the problem of liquidation of that position is such that the price will fade back to near its original position in the process, rendering whatever profit was achieved essentially null.
For all of its power and simplicity, the futures market is not perfect, and must be protected to preserve its value of trustworthiness. Strict rules of operation are zealously applied by a self-governing group of traders and watchdogs. The government has only a secondary agency in the careful maintenance of market integrity. All participants and beneficiaries of the futures markets are aware that in order for any value to be preserved, there must be rigorous observation of its rules. Offenders are quickly fined, escorted out of the business and banished.
There are many trading markets across the globe, but the futures markets remain the most honest in their purpose and product.
The wheat market Thursday is holding steady, awaiting the USDA data to release on Friday morning at 9:00 Pacific, 11:00 Central.
The outside markets are paying more attention to the war(s) in Ukraine and Israel. There is a creeping gloom, higher fuel prices and a sense of a potentially very expensive period ahead.
The winter has finally arrived. Midwestern wheat producers are seeing snow cover their acres with relief. Wheat in the PNW that had been only partially dormant is about to be tested by some very cold wind. PNW white wheat prices have been relatively dormant in recent weeks, moving very slowly in response to the whipsaw movement in the red wheats.
The trend in wheat prices overall is sideways in a long enough base to stage a move. The market will be watching the USDA reports very intensely for a potential ignition of a new move.
IGC raised its 2023-24 world wheat production estimate by 2 million metric tonnes to 787 million. Ukraine, Russia and Turkey all saw increases in expected production, but that is still down 2.1% from last year’s crop.
After the reports Friday, there will be commentary aplenty.
MarketBullets® Wednesday, January 10, 2024: Early AM
The market wants to wait until the “Big Data Dump” on Friday morning, in the hopes that we will receive reason to trade, long or short. The violent price reactions to USDA reports is sometimes due only to the intense scrutiny of the anticipated figures. Once released, it is a scramble among traders to discern the proper positions to be entering (or departing from). Sometimes the whole session is wrapped up in a kind of tsunami-of-statistics effect. It is fascinating, but not actually tradeable for any normal person. Once the dust settles, then the real decision-making begins.
The wheat price trend is nearly flat. China gave Chicago wheat a little boost for most of November into the first week of December, which in turn led to a shift among large speculative accounts in which they reduced their short-sold positions by about half. There was no big fundamental shift, but most of the wheat markets; HRW, HRS, SWW, and SRW managed to change their relentless downward momentum that had been running prices down from July to November of 2023.
Now we are in a slightly different pattern, with almost no trend bias. Enough wheat is moving to fulfill most global buyer requirements. There is enough global supply to continue this pattern until the northern hemisphere crop becomes more visible over the next 30-90 days.
Many global wheat buyers are very shallow in coverage ahead, as they have been rewarded for being slow to buy for many months. The funds are still short-sold, just not historically massive. There is still accumulated buying energy in both of these categories of trader’s positions, should the market startle them awake. It is still a long way to the bin from here in the northern hemisphere.
The Chicago front month futures contract is above its 60-day moving average, an arbitrary line in the sand. As long as that configuration is intact, there is little price threat to wheat in storage, although higher interest rates and other rising costs will keep upward pressure on the real cost of storage (not just the fees charged). The downside risk is less than it was this time last year, or anytime last year for that matter. It still makes sense to be prepared to sell incrementally on any given rally or just on plan schedule. Call your merchant. Ask about price floor strategies. Options are cheaper than they were just a short while ago.
Stay tuned. Keep an eye on the charts. Don’t worry about Friday’s reports and their effects. If a trend emerges it will be trackable. Lets track it!
MarketBullets® Monday, January 8, 2024: Close – into Tuesday early AM trade:
Mar 24 CBOT Wheat closed at $5.96 1/4, down 19 3/4 cents.
Mar 24 KCBT Wheat closed at $6.15 1/4, down 12 3/4 cent.
Mar 24 MGEX Wheat closed at $7.02 1/2, down 9 1/2 cents.
Post-midnight trade on Tuesday had Chicago Soft Red Winter (SRW), KC Hard Red Winter (HRW) and Minneapolis Hard Red Spring (HRS) all up 5 cents, trading in the lower half of Monday’s range.
We are trading without conviction in a market that has no compelling reason to ration wheat supplies via much higher prices. The forces that are allowing a very slight upward bias are collectively just enough to keep would-be speculative sellers mostly on the sidelines. Winter wheat production weather has been relatively mild this season, but a cold session is about to push through the northern hemisphere. Winter wheat has repeatedly proven to be winter-tougher than the trade guesses at least over the last 40 years or so (Winston used to say, “This is the 70th year in a row of unusual weather.”), but it is moisture that is the key, and that is better this year for most of the U.S. production areas, even though not as good as some might have hoped. Thus, we have only a thin edge to trade. The only way to judge this kind of market is with patience and a calculator. Interest rates are creeping higher (Storage costs), and other costs of operation are still rising, so there is a bit of a squeeze, leaving little room for casual guessing. The trend is still permitting a slower rate of cash sales for the moment, but that could end quickly. The charts will show changes before the news headlines.
Pre-report trade survey guesstimates show average expectation for U.S. wheat carryout to be reduced to 658.7 million bushels, with a range from minus 29 million (tighter) to plus 22 million (looser) than last month’s figure.
Export Inspections for the week ended Jan 4, 2024 showed U.S. wheat loaded year-to-date totalled 10.132 million metric tonnes, a better week, but still 16% behind last year’s pace.
This stuff is trackable. Lets track it!
MarketBullets® Friday, January 5, 2024: End of Week Update:
For the first week of the New Year 2024 (a four-day trading week):
Wheat Market _______WTD MTD Cents USD per bushel
Chicago SRW: -11 -11
PNW SWW Mar’24: -20 -20
KC HRW: -15 -15
MPLS HRS: -11¼ -11¼
Paris Milling: -3 -3
Cold weather in forecast for HRW country and most of the northern hemisphere wheat production areas. Winter?
Rumors of Chinese interest in U.S. wheat (probably SRW).
Slightly stronger U.S. Dollar Index
Trend continues toward expansion of Israeli-Hamas conflict into regional problems (overall global wheat prices are less affected by Red Sea shipping access).
The now-accomplished retracement of July high - November low range makes next upside target zone between $6.48 to $7.05 for front-month Chicago March futures; about 30 to 80 cents higher than today’s settlement. On the downside, A failure to discover buyers at $5.90 will open the way for a return to late November lows around $5.56. This is a “meatgrinder market” unless significant new fundamental factors emerge, which will take time to show. We are range-bound until then, with a slight upward trend.
Lots of street talk about the “Financial Bubble” being fragile. Large commercial office real estate in urban locations is vulnerable and already represents some bank exposure. Multi-family investors are faced with refinancing original debt to the tune of about a trillion dollars in coming years. Bank exposure can trigger wider problems. The market is assessing these and other interest rate exposures now.
Major USDA data coming out this week on Friday January 12, 9:00 AM Pacific Time, 11:00 Central. This is one of the reports that have a regular chance of moving the market.
Wheat prices are trending mildly higher without major fundamental movers at present. Funds have reduced their short-sold exposure enough that there is not a powder keg under this market…maybe just an M80…
Stay tuned.
MarketBullets® Friday, January 5, 2024: Early AM:
Chicago settled Wednesday at the psych price of $6.00, Just a wee bit below the (arbitrary) 60-session moving average price that is our chosen boundary between uptrend and down. On Thursday, the March contract ranged the 38.2% and 61.8% ratio retracements as if pre-set to do so. If that is validated in the coming sessions, the downward move from the high of December 6th may be declared completed, with a resumed upward trend definition. This is potentially a nice little illustration of the Fibonacci principle, although it is extremely short-term in nature, with only marginal value in decision-making for the marketing of wheat. The most this pattern can do for us is to assist with timing an already determined sale or validating an already established uptrend.
The closing settlement on Thursday was the second session with a close above the 60-day moving average, leaving only one close below that indicator on Wednesday, suggesting some positive price energy for wheat.
Buenos Aires Grains Exchange (Bage) reports: “After a week-on-week progress of 12.8 percentage points, 83.7% of the suitable area was harvested. An interannual delay of -15.8 percentage points is maintained. The average yield amounts to 26.5 Quintals/Hectare (about 20 bushels/acre). The new production projection is 15.1 Million metric Tonnes.” Upon election of a conservative government, Argentina has devalued their currency in an effort to cool off their raging inflation of 121.6% in 2023. They are likely to be much more aggressive in wheat exports than recent years, and they are capable of being a global player in wheat pricing.
U.S. domestic wheat production conditions are slowly improving with better moisture in major wheat production areas, with ratings up in TX, OK, KS and SD. Drought conditions do not disappear quickly from the map, but the moisture trend is positive.
The present fundamental of plentiful supplies of wheat for sale will have the tendency to limit strong rallies in global wheat prices into the northern hemisphere spring weather markets season, which begins on dormancy break in the southern tier of wheat states in late February to early March. It’s awfully hard to kill Hard Red Winter (HRW) wheat with cold, but every year it’s a concern, especially when there is short moisture. Until this becomes a daily coffee talk subject, this market will be hunting for reasons to trend much higher.
The wheat price trend is nominally higher, led by Chicago, but you have to squint your eyes a little to see it. Paris is not helping, with its confirmed downtrend intact. Russia is not going to run out of wheat to sell this year, and they are highly motivated to move the stuff. It makes sense to be patient when the chart is tilted upward, but if it reverses, we will have to take it seriously. PNW Soft White Winter (SWW) wheat demand is steady, but not inspiring. Storing wheat is not an efficient way to speculate. Call your merchant and talk about price floor strategies during rallies. Stay tuned.
MarketBullets® Wednesday, January 3, 2024: Early AM:
Here comes 2024! It’s time to refocus marketing energy. The wheat market, as represented by Chicago futures contract prices is in a very mild upward tilt, a weak trend that is still very vulnerable to declines below key price levels that would obliviate the young upward sprout. Marketing in this environment is similar to working in a regular downtrend; accelerating scheduled transactions when the slope is negative, at least staying on incremental sales schedules and slowing or suspending sales when the trend is positive (by our definition, or your own definition, as long as it is consistent).
If we can assist in identifying trends and trend changes, your investment as a subscriber is rewarded. This stuff is trackable. Let’s track it!
The first trading day of the new year gave us a 21-cent downward shot in Chicago front-month trade. This put the price back to the same level as December 13th, 15 sessions back, and itself the lowest trade price since December 4th. The current trend was not affected, which just means that about half of the gains provided by a series of Chinese purchases of Soft Red Winter (SRW-Chicago) have been returned to the abyss, leaving us in a sideways pattern with an ominous lower high, 10-cents below the highs of December 6. The patterns followed by the other wheat markets were roughly the same, but attenuated.
The next question that must be attended is whether wheat will slide back below the $6.00 level, which if realized will result in the *“Box-o’-Rox” signaling “resume and/or increase incremental sales” (both old crop and new). At which we would start over like we do, in the quest for a new “Base” from which a new uptrend may be born. This may take us well past emergence from dormancy into the spring weather markets before we will have a definable favorable trend. This is not an easy market!
2023 ended up with a $2.00 per bushel decline in PNW Soft White Wheat from the first week of January 2022 at $8.55, down to $6.55 today. Chicago surrendered “only” $1.65 thanks to China. KC Hard Red Winter (HRW) lost $2.64, and Minneapolis Hard Red Spring (HRS) is $2.23 below this time last year. Paris Milling wheat futures are down €88 per metric tonne for the year (about $2.41 per bushel).
Is 2024 bound to be a better year for wheat prices? If by that you mean more positive-sloped, probably yes. If you mean a better absolute pricing opportunity, then probably no. The highs for the year are bound to be lower than last year’s stellar peak (if that rare Black Swan fails to return to the pond once again). The pressure on marketing plans is sure to be higher, as the market is likely to be volatile and sometimes nasty in a war, election, harsh-weather year.
All things will be known in the future. There are no problems that cannot be answered with study. The present wheat market pattern is at least somewhat in a positive slope. Stay tuned to this channel for the next chapter in the saga.
This stuff is trackable. We track it.
MarketBullets® Thursday, December 28, 2023: Close:
Chicago front-month futures (March) bounced off of the centerline of the last 18-days of trade. Closed within the range of the last two sessions.
Next batch of USDA reports to be released Friday, January 12, 9:00 AM Pacific, 11:00 AM Central. Lots of data, multiple reports.
Egypt and other importers are working on the March shipment time frame, still considered “hand-to-mouth”.
Wheat price trend remains steady; sideways with slight upward bias.
It is not required to stress about wheat prices, but it seems a good idea to check-in frequently. Stay on this channel.
MarketBullets® Thursday, December 28, 2023: Early AM:
No trend changes. Box o’ Rox still in “Suspend cash sales” position (above the 90-calendar-day moving average) and above the 63-day regression mean. The sell trigger for Chicago wheat would be on a significant break below $6.03, i.e. closing settlement.
Interest rates remain in at least a short-term downward trend (30-year Treasury bond and 10-year T-note price charts are rising, as interest rates have a directly inverse relationship to bond prices).
The U.S. Dollar Index is falling, also related to lower interest rates, which also are often associated with lower general price inflation.
There is moisture available to late-maturing regions of southern hemisphere wheat production.
The rookies are manning many trade desks this week. The boss is available on the phone if needed, but there is an active poker game in the trade room.
The wheat trend is slightly upward, but without conviction. Steady as she goes…
MarketBullets® Friday, December 22, 2023: Early AM:
No help from wheat’s sister corn and soybean contracts as the remaining balance of South American crops have been finding moisture.
Volume of trade in wheat has been declining, as holiday-toned trade is clearly in control. There is still some talk of more Chinese wheat purchases…no evidence that it means anything but wishful thinking.
Vladimir Putin seems to be gloating about wanting U.S. support for Ukraine, but the political pressure on his administration remains as high as it can be expected to be in such a captive audience. He is excited about controlling such a food production addition to his food weapon to be used for future domination of global wheat and other ag markets.
The wheat trend is on hold for this week and probably for next week as well.
Next MarketBullets update will be on December 26. Enjoy your egg-nog.
Merry Christmas!
MarketBullets® Thursday, December 21, 2023: Early AM:
Egypt and Saudi Arabia together have purchased about 1.75 million metric tonnes of wheat in the last week from Russia.
Summer rains in Argentina and Brazil have been welcomed, although heavy rains on unharvested crops may cause some losses.
The proxy war between Iran/Hamas and Israel appears to be entering a slower phase. According to the Institute for Study of War (ISW) updates, Iran considers the conflict to be the inception of a long-term war intended to destroy Israel.
There are indications that Putin’s Russia is abandoning the pretense of interest in negotiations with Ukraine, which appears to be the result of waning U.S. political support for Ukraine, without which Ukraine cannot prevail.
The trend for wheat is neutral to positive. Volume is low and the market is quiet. Very early trade on Thursday morning is up about 5 cents in Chicago. Stay tuned with quick reviews of this site. We will call attention to trend-changing activity when it emerges.
Merry Christmas!
MarketBullets® Wednesday, December 20, 2023: Early AM:
Wheat markets appear to have become resigned to waiting until the new year to move. This tone may be interrupted if a well-planned strike occurs against U.S. or other pro-Israeli aligned entity. Meanwhile, the ranges are narrow, the price direction is sideways and the volume of trade is declining. This makes options less expensive. It also creates an opportunity to do a little deep thought work on the marketing plan for 2024.
If there is a fundamental factor worth watching (outside of war) it is weather, mostly in the southern hemisphere, then later in Texas, Kansas and Oklahoma, where wheat growing conditions are edging toward the best in a few years. These are not going to drive a year-end rally, but the market is thinking about it for later.
If a change emerges in the next few weeks, it will be obvious. Stay tuned. We’ll catchem!
MarketBullets® Tuesday, December 19, 2023: Early AM:
Chicago weekly front month chartline has encountered the 38.2% ratio retracement line and is validating it. If the price does not continue upward, chewing through the sellers willing and waiting to transact at this price, the next technical target becomes a test of the previous, multi-year low at $5.29, printed only three weeks ago. As long as this wheat market stays within the range from $6.49 down to $5.29, there is no confirmation of any major up or downtrend.
Just chart observation alone will be an important driver of the next couple of weeks work, as “Caravan Rolidei” makes its way along the market road. https://alchetron.com/Bye-Bye-Brazil. Argentinian crops of both grains and politics are likely to be market movers in 2024.
Australian wheat is on sale now, as the Aussie statistics entity “ABARES” or Australian Bureau of Agricultural and Resource Economics and Sciences has released a production forecast for 25.5 million metric tonnes of wheat, 11.1 million tonnes of barley and 5.5 million of canola. The wheat crop is expected to reflect a 33% decline from last year’s record crop. This is well known and baked into global wheat prices at this point, hence no market reaction to such reports.
The market is growing sluggish, even dull. This is a time for reflection about the marketing plan and its effectiveness. A little study of longer-term charts, maybe a look at the outside markets like crude oil/diesel, interest rates, currency trends…soak in the information.
The wheat trend has changed from a full-on, downward slope to a slightly positive tilt. Gauging the strength and intensity of the price behavior and watching for where to place the alarm traps on the chart is a healthy excecise. Write down what you think. Stay tuned to this channel for perspective. This stuff is trackable. We track it!
MarketBullets® Monday, December 18, 2023: Early AM:
Chicago wheat is 27 cents below a test of the price zone that revealed enough selling interest to turn the pattern back toward the lower slope, a small event that was only 7 trading sessions ago. If this “test” is completed with a closing break-out above $6.48 in March’24 futures, it will be a well-defined, 1-2-3 reversal bot tom, a common pattern that often yields at least a short-term positive. For marketers, on either side buy or sell, it is not much more than a trigger for action on decisions already made. As for the longer-term perspective, it is just another confirmation that the global wheat market has reached a new price “normal” zone that will ultimately be one part of a much larger proportional upward price retracement.
In November, China imported an all-time high amount of corn, at 3.59 million metric tonnes. Agricensus
One of the best reviews of macro issues in the grain markets every week has been Angie Setzer via Barchart with “Sunday Scaries”. Her range of information and insight is uncommonly wide and clear. This week her coverage of Argentina’s emerging political/economic setup is worth reading. Argentina was once a dominant wheat exporter and global price setter. Lately, they had barely been worth an occasional below-the-fold article. There is a shift underway.
Mid and south-western wheat has been getting some moisture that had been missed over the past couple of crops. There is wheat coming.
Crude oil is sitting on the mean line of an 18-month-old downward channel dating back to June highs of 2022, which reflects a $50 per barrel drop in global crude oil. The talk is of excess supply due to Chinese demand slowing and the usual fog around whether OPEC members are adhering to production limits.
New Legislation Would Require USDA to Study Fertilizer Industry: The Fertilizer Research Act has been introduced by three senators to require USDA to study competition and trends in the fertilizer market.
Wheat seems likely to be less than exciting for the next couple of weeks, but we will continue to monitor and comment.
Stay tuned.
MarketBullets® Friday, December 15, 2023: Close:
Wheat Market _______WTD MTD Cents USD per bushel
Chicago SRW: -2½ +59
PNW SWW Mar’24: +2 -10
KC HRW: -19¾ - ¾
MPLS HRS: +2¾ +28¾
Paris Milling: -22 +10
Chicago wheat spent a volatile week amid a 30-cent high-low range, but managed to close within 3 cents of the weekly starting point. Kansas City Hard Red Winter (HRW) wheat futures were weaker than Chicago, continuing the same pattern as over the past several weeks. Aggressive Chinese buying of Chicago Soft Red Winter (SRW) wheat imports set Chicago prices in the leadership position among the 3 major exchange-traded varieties. Minneapolis Hard Red Spring (HRS) was near unchanged, settling the week with a 2¾-cent rally.
Paris Milling Wheat futures were down €7.50 per metric tonne (about $.22 per bushel), settling at the lowest weekly close since July of 2021, a reflection of a soft European wheat market full of Russian and Ukrainian wheat.
Large Speculative fund money as reported this week did move toward covering (buying back) a significant portion (40%) of its previously heavy net short-sold positions, leaving the trade’s favorite short-term factor at a net -40,021 short contracts. The reported change took place during last week’s 29-cent rally.
The week did not change the established trend lines, mostly sideways. The time, backing and filling required to construct a pattern base for the next leg of price movement seems likely to be prolonged into the new year. There are now only 9 trading days remaining in the year 2023, of which at least 2 are only limited hours, the balance of this period is usually lower volume (already in decline) with slower market chatter. The price can still be volatile and occasionally a factor emerges that is sustained into the new year, so we will continue to monitor and review. Stay relaxed but tuned in to this channel. Merry Christmas!
MarketBullets® Friday, December 15, 2023: Early AM:
Early AM trade Friday morning is neutral, with mild swings of a few cents on either side of unchanged. Volume of trade has been fading for the last week or so, heading into holiday trade mode.
U.S. wheat net weekly sales emerged to a marketing year high of 1,490,500 metric tonnes. Sold commitments are now ahead of last year’s pace, exceeding last year’s pace by about 3% as of the week ending on December 7, now showing 14.53 million metric tonnes on the books.
Argentina’s politics have swung to the conservative side, with the economic results of socialism being poor to very poor lately. The effect of the changes brought by the new administration is likely to make Argentine wheat more competitive, at least for the next few months.
The Federal Reserve has announced that it is holding interest rates steady after its Dec 12-13 meeting. The target rate is now 5.25% to 5.5%. The Fed has raised the very short-term rates 11 times at this point. Inflation as the Fed applies the term is now 3.1% versus last year this week. The Fed-watching game players are beginning to think rate increases are completed, although that is a guess.
Market Interest rates have been falling since October 27, at least as far as the 2, 5, 10 and 30-Year T-Notes indicate. This tends to push the U.S. Dollar to lower levels and make it less expensive to store wheat as time passes, mild price-positive factors.
32% of U.S. winter wheat is in moderate or worse drought conditions. While that is an improvement over some previous periods, Kansas, still the number one wheat producer in the U.S. is dry. This will help underpin wheat prices for the time being.
The market perception is that there is enough risk to allow a new, slightly higher global wheat price band, and perhaps a (late) seasonal low to be identified at last. This may not imply any immediate, major price rally, but will allow work on a proportional retracement of the very large downward move since March of 2022. See “Long Term” wheat charts.
The current wheat price trend is less negative-more positive, but in a transitional band. Breakouts above or below the band will be obvious and well-anticipated. Meanwhile, Stay tuned.
MarketBullets® Wednesday, December 13, 2023: Early AM:
Tuesday wheat price whipsaw! Up 16 cents in Chicago on Tuesday and as of Wednesday’s very early AM trade, it’s a week-to-date minus 8 cents in Chicago. KC Hard Red Winter (HRW) followed with a minus 7, and Minneapolis Hard Red Spring (HRS) with a more sedate plus 1½. It has been some hard work for not much to show.
Paris milling wheat (probably the most liquid wheat market representative of European and Black Sea values) showed a €1.00 per metric tonne gain for the week so far (about +$.03 per bushel)
Short-term wheat chart indicator dials are waggling back and forth, a volatility factor that may be due to the influence of intended month , quarter and year-end position adjustments by large trading entities. Ideally this type of movement is more efficient if accomplished before any drop-off of trade volume in the last week or two before the new year. There are only 11 trading days remaining in 2023, of which some have limited trading value.
Export inspections for the latest week reported showed white wheat at 103,000 metric tonnes (36%) and HRS at 96,000 MT (34%) of the 281,697 total. Total wheat exports YTD are at 8.6 million metric tonnes versus 11.1 MMT this week last year, a 22% lag. Last week’s World Ag Supply Demand Estimates (WASDE) showed that SRW exports are the largest exports for that class since 2013/14. White wheat exports were lowered 5 million bushels to 155 million on a slow pace of sales and shipments.
The key factor to watch over the next month is global wheat demand pace, partly due to pressure on end-users to accelerate buying on any perceived upward price tendency (even technically driven retracements), and partly on southern hemisphere crop performance.
Crude oil continues to fade on market expectations of economic deceleration in the first quarter of 2024.
The short-term wheat trend remains above its 60-session moving average by about 20 cents in Chicago lead futures contracts. Given the volatility of recent days, that is not a comforting distance. The apparent, loosely defined sideways channel since the end of September is intact. We are already in holiday-toned markets. Stay tuned for more
MarketBullets® Tuesday, December 12, 2023: Early AM:
Monday gave us a rapid down-move that brought Chicago wheat Daily charts below the 38.2% ratio retracement level, suggesting that the next target of 61.8% (down another 25 cents from early Tuesday AM trade) becomes more likely. The proportion of the powerful upward shot that is given back is a measurement of overall technical strength. If the price holds above that new target, it becomes part of a larger upward pattern. It will take time to develop. Meanwhile the market will attempt to absorb the gains and continue to move wheat.
The U.S. Dollar Index had been developing a downward attitude but has paused and recovered some. This is not a heavy negative, but the slight gain in competitiveness for U.S. grains is on hold.
The wheat market has very little fundamental stress that calls for price rationing of wheat, putting the charts in charge for the moment, which expands what influence the big trading funds have. The aggregate fund position remains net short-sold, but with room for more, historically speaking.
The “Chinese Rally” is over, at least for a while. Russia is acting like they want to slow down.
Box-o-Rox still on “Suspend Sales” status, but there is less than inspiring price support.
Stay tuned, use the pricing tools for protection of wheat in the bin if not already covered.
MarketBullets® Monday, December 11, 2023: Early AM:
We begin the new week softly, with Chicago Soft Red Winter (SRW) pulling back a dime just after midnight Sunday. KC Hard Red Winter (HRW) down 5 cents and Minneapolis Hard Red Spring (HRS) off 4 cents per bushel.
Chicago has been the leader for the last 10 sessions or so, with Chinese sponsoring the drama with a rapid-fire series of SRW purchases totaling nearly 2 million metric tonnes of U.S. wheat, virtually all SRW. The political nuances of this activity are powerful, as Russia had until just before the SRW binge dominated Chinese wheat and crude oil business. At the producer level, it seems curious but is a shrug. Maybe we will hear more later about why China suddenly turned to U.S. wheat.
At this point the wheat market seems to be satisfied that China has completed their series of wheat purchases, so without further supportive information, it is not a shock to see a “correction” in prices, and that it seems focused on Chicago. The global wheat market buyers have been watching the last 10 days of wheat movement with acute interest, but now may sit back in their chairs a bit. It would not take a huge indication of buying interest from any source to spook them, but for now it seems we will see a break.
The downside tech target box for Chicago wheat is $6.13 to $5.91 in the March futures (between 18 to 40 cents below very early trade Monday) The other U.S. futures exchanges will probably see proportional downward moves. The behavior of wheat futures in this retracement period will tell us quite a bit about the latent price strength going forward. Intuition seems to be a non-believer in extended upward movement, but that is not a tradable idea. It does seem like a prudent idea to take a little slice of the pie, just in honor of the good Chinese citizens that will be paying for U.S. SRW wheat.
There are only a few full and meaningful trading days left in 2023. The funds will be trimming their positions with care, while buyers are counting the wheat that is there.
Weather in the southern hemisphere will be about the only game in town for the next couple of weeks.
The wheat price trendline has been stretched. The big picture is still neutral, but Chicago is still above its 90-calendar-day moving average. Sellers choice. Stay tuned.
MarketBullets® Friday, December 8, 2023: End of Week Review:
Wheat Market _______WTD MTD Cents USD per bushel
Chicago SRW: +29 +61½
PNW SWW Mar’24: Unch Unch
KC HRW: +17 +19
MPLS HRS: +01 +27½
Paris Milling: +04½ +11¾
MarketBullets® Friday, December 8, 2023:
Early AM: The heartbeat of the young price rally remained steady in late Thursday PM trade, but after midnight showed a minus-5-6 cents in Chicago. Traders across the spectrum keep checking to see if the Chinese has made another buy. The big speculative fund managers are considering clipping some coupons in the Friday session. It is rare even in a full-on bull market to see a run of the magnitude of this week; a 41-cent week-to-date gain, heading into the post-midnight trade ahead of a USDA World Ag Supply Demand Estimate (WASDE) report. The pressure on large traders to take profits by buying back previously sold contracts has increased every day since November 28, 8+ sessions and over 70 cents back. Probably some of the beautiful string of up-days were sponsored by these traders short-covering. We will not know how much that is until the COT data is analyzed on Friday evening. Meanwhile, the rationale for selling some wheat is robust.
The wheat trade is aware that China may have finished its wheat purchase program, at least for now, and that what is left for support is potential fund short-covering and some marginal weather-driven crop adjustments for the southern hemisphere. On a Friday ahead of the December USDA WASDE, there is a fair chance of a pullback in price. If this does not occur, that may be deemed a sign of market strength. The report has the usual guessing game associated, but the December report is often a dull affair, with few market-driving surprises. The statisticians like to wait for the 4th calendar quarter inventory data to be released in early January before making any serious adjustments.
The ratio-driven price target of a 38.2% upward retracement of the down-move from late July to late November has been achieved in Chicago wheat front-month futures at $6.49. If that is not significantly exceeded (toward the next ratio target at 61.8% or about $7.06), the fulfillment of the first ratio goal qualifies as “completed”, and the market is likely to reset back to some lower level to seek stronger reasons to buy.
All of the above is “prognostication”. Fortune-telling is not the best way to run a marketing plan, although it is very tempting at times. A runup of the magnitude we have seen in the last week-and-a-half looks a bit like a “gift” horse, and we have all heard about not looking too closely at it before accepting it. Trend followers (Us) are not supposed to be so indulgent, preferring hard evidence of a change in direction. It would take a pullback below the 90-calendar day moving average ($6.00 in Chicago March’24 futures) to trigger the real “failure alarm”, about 37 cents below early AM Friday trade. So there is a little quandary for red wheat variety traders; take at least a slice of the “gift” rally, or hold for a more formal invitation. Feel the pull? Good! That means you are paying serious attention! Now let the marketing plan work.
PNW Soft White Winter (SWW) markets have not built the same expectations, but are slightly exposed on a potential Chicago break.
Stay tuned. Write down what you think.
MarketBullets® Thursday, December 7, 2023 – Early AM: The wheat market looked powerful at the opening bell Wednesday morning, but faded back to close 17 cents below the high. After midnight on Thursday AM, buyers were pushing Chicago up about 7 cents, still 8-10 cents below Wednesday’s high of $6.49¾ which is more than $1.00 per bushel above the starting lows last week, and off of a sharp, one-day low with a ”Vee” turn upward, a rare pattern.
China was in again on Tuesday and took yet another 198,000 metric tonnes of Soft Red Winter (SRW). Chicago wheat futures have been on afterburners for 7 sessions now, with Chinese sponsorship. Its been great, but what happens when the Chinese shut the buying window? Can we depend on the big short-sold funds to carry on? I won’t be putting the family station wagon up against that bet (that’s a 60’s reference). Still, the heat is rising. The Chinese political system is working in wheat’s favor, and not all from Russia.
Egypt has elected to extend their wheat buying with another purchase announced Tuesday for January shipment. They (and others) have been operating in a hand-to-mouth pattern for a long time, having been rewarded consistently for being slow. Now there is a threat of higher prices. Buyers are becoming uncomfy with this new trend. Between this kind of FOMO motivation for end-users and large speculative accounts protecting previous profits, we may have some legs to run on yet. The trend is up, at least for SRW. KC, Minneapolis and even Paris have been responding a little jealously, but so far Chicago is the only wheat contract to rise firmly above its 90-calendar-day moving average. PNW white wheat has tipped its hat to the rally in red wheats, but has been sluggish without meaningful cash buyer support. If the big trading funds light up the boards with short-covering, SWW will come along for some of the ride. What would be marvelous is if China were to take some SWW offers. Then we might see some fireworks.
Meanwhile it is time to be watching closely if you have exposure of stored wheat. It just seems prudent to be ready with a sale.
The global wheat complex is sitting up and watching the drama in Chicago. Sweet Polly Purebread is running for her life. Can she make it over the pass before the storm comes? Tune in tomorrow and find out.
MarketBullets® Wednesday, December 6, 2023 – Early AM:
The U.S. Department of Agriculture (USDA) confirmed private sales of 198,000 metric tons of U.S. soft red winter wheat to China on Tuesday, which is the 5th in a series of U.S. wheat purchases by China, virtually all of which is Soft Red Winter (SRW). The running total is now 1.149 million metric tonnes. Price positive (especially Chicago).
Egypt’s wheat buying this week included 120,000 metric tonnes from Russia and 60,000 from Ukraine for Jan/Feb delivery. It still is a little astonishing that Ukraine is capable of such deliveries and that Egypt is a regular customer. The political/economic relationships in that region are a lifetime study. (Price neutral)
Australian wheat crop estimates are at 25.5 million metric tonnes, a 100,000 tonne increase, but still a third less production than last year’s record crop. (price neutral to negative)
The Chicago wheat front-month futures contract is up 80 cents (lowest to highest) in the six (6) sessions since Monday, November 27, mostly because of the Chinese purchases. KC HRW up 74 cents and Minneapolis up 47.
Early wheat trade on Wednesday shows Chicago was a cent or two lower at midnight, but recovered to unchanged by 12:45 AM on low volume. KC Hard Red Winter (HRW) the same. Minneapolis Hard Red Spring (HRS) was down about 3. This early trade has little bearing on Wednesday’s expectations, but buoyant is good.
USDA is coming with this month’s World Ag Supply and Demand Estimates (WASDE) on Friday (9:00 AM Pacific Time / 11:00 AM Central. No drama expected, as by December most of the estimated figures have been developed already and only small adjustments usually occur.
The short-term upward shot of the last week of wheat trade is the strongest such move since mid-July 2023 on the way toward highs above $8.00 per bushel in Chicago ($9.40 Minneapolis, and $9.20 KC). Chicago is dragging the other contracts upward. China is flexing their economic and political power muscles in public view via wheat buying. The Power Point will show China’s good will intentions.
MarketBullets® Tuesday, December 5, 2023 – Early AM:
USDA reported a 440,000 metric tonne Soft Red Winter (SRW) wheat sale to China Monday morning for 23/24 delivery. This is a follow-on to a string of sales including about 220,000 tonnes in the first week of October, 181,000 tonnes Oct. 13 and 110,000 tonnes on Nov. 22.
38% retrace in Chicago Front Month March’24 has been achieved. It’s so nice to see such a string of positive days that it seems a shame to mistrust it, but so we must until some evidence of true grit is shown. A good rally should be a little rowdy, a little untrustworthy with a “wall of worry” to climb. This one is just a little too conservative and reliable. Maybe that is just the long and weary decline talking. Anyway, don’t blink. The market could shift very quickly from here. Let’s enjoy what we have so far; a 60-cent run in 5 trading sessions. Maybe a little incremental sale so as to pay those seeding bills before the tax year closes?
Minneapolis has peeked out above its 62-week mean line for the first time since September 15, although that mean is a gently descending line, which allows a sideways trendline to achieve a breakout merely by existing at the same price long enough. No drama here yet.
KC weekly mean is 691¾, about 35 cents above the present price which is 60 cents above last week’s 2.25-year low. This market could get technically unhealthy without a break and test, or a reasonably positive fundamental background factor on which the market could rest.
StatsCan released Canadian production numbers for 2024 Hard Red Spring wheat of 24.76 million metric tonnes, just a tid more than the average pre-report guess. No drama.
Layers of exhausted cash wheat sellers, having held on for many weeks into last week’s long-term lows, have been discovered on the way upward. It will take some buying power to chew through the available wheat for sale, which could come from formerly lazy import buyers who sense an end to the downward trend that has been their friend for so many months. If there is not some surprise factor lurking behind the curtain, there is bound to be a little backing and filling, but the new positive price pattern is now over a week old and holding. Just don’t get married to it yet.
We are in a rising short-term price period. There is reason to look for short-covering among the big funds, which is the most obvious bit of fuel that we have been watching for what seems like a year. Stay tuned, the ride is getting interesting.
MarketBullets® Wednesday, December 6, 2023 – Early AM:
The U.S. Department of Agriculture (USDA) confirmed private sales of 198,000 metric tons of U.S. soft red winter wheat to China on Tuesday, which is the 5th in a series of U.S. wheat purchases by China, virtually all of which is Soft Red Winter (SRW). The running total is now 1.149 million metric tonnes. Price positive (especially Chicago).
Egypt’s wheat buying this week included 120,000 metric tonnes from Russia and 60,000 from Ukraine for Jan/Feb delivery. It still is a little astonishing that Ukraine is capable of such deliveries and that Egypt is a regular customer. The political/economic relationships in that region are a lifetime study. (Price neutral)
Australian wheat crop estimates are at 25.5 million metric tonnes, a 100,000 tonne increase, but still a third less production than last year’s record crop. (price neutral to negative)
The Chicago wheat front-month futures contract is up 80 cents (lowest to highest) in the six (6) sessions since Monday, November 27, mostly because of the Chinese purchases. KC HRW up 74 cents and Minneapolis up 47.
Early wheat trade on Wednesday shows Chicago was a cent or two lower at midnight, but recovered to unchanged by 12:45 AM on low volume. KC Hard Red Winter (HRW) the same. Minneapolis Hard Red Spring (HRS) was down about 3. This early trade has little bearing on Wednesday’s expectations, but buoyant is good.
USDA is coming with this month’s World Ag Supply and Demand Estimates (WASDE) on Friday (9:00 AM Pacific Time / 11:00 AM Central. No drama expected, as by December most of the estimated figures have been developed already and only small adjustments usually occur.
The short-term upward shot of the last week of wheat trade is the strongest such move since mid-July 2023 on the way toward highs above $8.00 per bushel in Chicago ($9.40 Minneapolis, and $9.20 KC). Chicago is dragging the other contracts upward. China is flexing their economic and political power muscles in public view via wheat buying. The Power Point will show China’s good will intentions.
Wheat is in an uptrend, but it is still very young. Stay tuned for developments.
MarketBullets® Monday, December 4, 2023 – Early AM:
Just after midnight Sunday heading into Monday, there were signs of positive life in Chicago wheat prices, 2-4 cents up. It is not likely that the seasonal low is such a simple “Vee” bottom, as there will be some entities willing to sell the short-term rally, but such green numbers are whispering of underlying strength. Minneapolis Hard Red Spring (HRS) was trading flat in the front months, with firmer deferred contracts. KC Hard Red Winter (HRW) is following Chicago. Mild price-positive.
The longer-term charts show nearest upside Chicago retracement target at about $6.23 (+17 cents), KC at $7.35 (+90 cents), and Minneapolis $6.93 (+63 cents). All of these retracements pre-suppose the low is already in, which is a slender reed upon which to lean. There will be a retracement eventually, maybe it is underway - not a trade yet, just a guess. What else is there to do? Paris Milling Wheat has the same low, but is as weak as KC, with no buy signal pattern in place yet. Just waiting and watching for proof of low. Mild price-positive.
Last week’s U.S. Wheat Export Sales report was 622,803 metric tonnes of sales for the week ended Nov 23, a 6-week high. Soft Red Winter (SRW) led the week at 186k MT, Hard Red Winter was solid at 164,700, Hard Red Spring (HRS) was 120,000, and White stayed regular at 135.000. Total U.S. export shipments reported earlier were 7.9 million metric tonnes. Wheat is still moving, and the week’s rally shook loose a few more bushels from country origins. Mildly price-positive.
Russia’s variable wheat export tax has been reduced to $42.35 per metric tonne for the Dec 6-12 period, the third week in a row of reduction with the aim of keeping wheat flowing into the export channel. Russian producers are encountering shrinking margins. Mild price-negative
On Friday Chicago lead-month futures (March ’24 delivery) closed above the 90-calendar day moving average for only the second day since August 8, 2023. The “Box-o-Rox Marketing System” says that means, “suspend sales”, a rare pattern this year. In a year like this when the price is below the average most of the time, the baseline idea is to cause incremental sales to proceed on time each month, ultimately raising the average sale for the calendar year above the average price bid. In years with an uptrend, sales are slowed to allow the trend to assist, again raising the average accumulated sale price above the average bid. The system is crude and will test your patience, but over time it will help keep the average sale of cash wheat above the annual average of cash bids, and in some years may be dramatically better. It is rarely worse. Could it be improved? Of course! But remember to KISS = Keep It Short and Sweet. Too much complexity makes a program more and more rigid, which becomes vulnerable to changes in macro-conditions. Please feel free to call Gary at 509-337-8417 any day between 12 and 3 PM Pacific Time (10-1 Central) with questions about “Box-o-Rox”.
Trendline in place: negative. Very tempting to buy, but without signal to go ahead.
BTW Bitcoin drives me nuts! Closing in on $41,000 highest since May of ’22. Apparently possible Fed rate cuts are the buzz! Sheesh! I will never trade this contract. It makes no sense to me!
MarketBullets® Thursday, November 30, 2023 – Early AM: Never argue with the market…
MarketBullets® Thursday, November 30, 2023 – Early AM:
Chicago is back to the same price level as November 22, and right on top of the 75-day mean line dating back to mid-August. The next “normal” move would be a successful test of the lows which are 30 cents below early Thursday trade. This is microscopic chart study compared to the whole moves of the last three (3) years of wheat charts. For a true trend-follower, it is mostly just a distraction unless its for very short-term decision-making.
The rollover from December contracts to the next nearest delivery month (March of 2024) will be reflected in continuous charts as a “ghost gain”, that is, Thursday November 30 will print December futures and Friday December 1 will print March futures on the same chart, resulting in a Friday price about 24 cents above the Thursday close. It is a visual anomaly that system traders must deal with, but which trend trackers for marketing purposes mostly just note and move on. Our daily charts will not be affected, as we will just move from whole Dec to whole Mar’24 charts. Open order entries are usually manually adjusted for futures traders. Cash traders must look at basis changes to stay oriented. Bottom line: Rollover rarely affect trendlines.
Russian Urals-origin crude oil have dipped below Putin’s maximum discount of $17 per barrel. Overall the Crude complex has little trending power at the moment.
Natural Gas, the key input feedstock for anhydrous ammonia production, has been flat to negative for the calendar year-to-date. The winter heating season is upon us now, so this pattern may be prodded to shift upward.
StatsCan pre-report projections for Canadian Hard Red Spring wheat are about 24 million metric tonnes, slightly below the most recent USDA’s expectations.
Russian wheat analyst Andrey Sizov (Sovecon) has reduced his expectations for Russian wheat production next year due to poor growing conditions a reduction in planted area based on marginal profit expectations. https://sizov.report/
WASHINGTON, Nov 29 (Reuters) - The U.S. Department of Agriculture on Wednesday said it would start accepting applications for an initial $300 million in funding to help U.S. agricultural exporters break into new markets outside China, Canada, Mexico and the European Union.
The tone of the wheat market complex has improved slightly. It is actually a sign of health if not strength that the new low that managed to penetrate the old-school support line that had been intact for so long has been repudiated for the moment. The trend is still negative, but the expectations may have shifted. The new month may present us with unfamiliar net technical settings that allow a rally. One sour note is the interesting pattern-match between the 19 month decline of 2008-2009 and the remarkably similar one of 2022-2023. The older decline took 28 months to play out and did not show any positive drama until July of 2010. The current one is only 20 months old. There is no rational basis to expect the two patterns to have any relationship, but still…
The holiday season is here, which only means that lots of traders will be watching the wheat market, an indoor sport. Stay tuned to this channel.
MarketBullets® Wednesday, November 29, 2023 – Early AM:
Tuesday’s wheat markets made a sound: a Gasp! The same sound you hear yourself make, when as a test, you stick your toe into very cold water, followed by a spasmodic jerk motion out of the water. It seems likely there were some large and unexpected sell orders Monday, perhaps entered by a trading fund or other commercial entity. The motivation for such an order could have been either auto-liquidation of an older long-bought position as it touched a pre-planned exit price, or an aggressive new seller that wanted to be ahead of the probable execution of clustered sell-stop orders just under the “support” price that had turned the market back upward so many times in the past. There are other scenarios, but there has to be significant capital applied to make such a quick move.
The recoil from the cold water took place on Tuesday, as the trade had a chance to review the background logic of the sudden sell-off Monday. At this point it could be argued that the quick break below the support at about $5.40 in Chicago was an anomaly, and the market quickly smoothed over the lesion, but the reality is that the damage has been done. It has been proven that there are few buying guards posted on the now-cracked price support wall. Another attempt to open the next chapter of selling is likely.
A very cursory examination of the micro-time frame charts suggests the crack came in Chicago, as Minneapolis was 15 minutes behind and KC was about 8-10 minutes behind in following the price lower. Paris was closer behind Chicago but broke 5-plus minutes after Chicago as well. This kind of analysis is not decisive, and it is no surprise that the most liquid of the 3 major exchange traded wheat contracts was the leader in time. Corn was lower on Monday but had broken downward much earlier in the day.
All of the above is interesting but not revealing, although it is a good reminder that Chicago Soft Red Winter (SRW) wheat futures do function as a global price bellwether most of the time.
The fundamentals of the wheat trade have not suddenly changed. U.S. wheat export shipments remain behind last year’s cumulative totals for the same week. The world has not rejected Russian bread wheat. The U.S. Dollar Index continues its pullback from it October intermediate highs, making some U.S. wheat more available in export competition, but the break in the cost of money is still an indirect factor. Southern hemisphere crop production weather is uneven, as Australian projections for their upcoming harvest are smaller than last year. Argentina, once a powerhouse in the wheat export business, is having some economic problems and some weather issues that will prevent them from being a force heading into the new year.
The trend in wheat is downward. Monday’s dramatic break below the chart support lines (price zones that have revealed buying interest repeatedly in the recent and intermediate past) has triggered selling interest. Corn is also in harmony with wheat on the negative side. There is no adequate reason to hold or buy wheat here, as tempting as that seems. New lows are consistently followed by new new lows…until they are not. This is a period of waiting for confirmation, all the while following the pre-set marketing plan that hopefully has long included incremental sales of both old and new-crop wheat.
Call your merchant. There are strategies for price floors.
Stay tuned here!
MarketBullets® Tuesday, November 28, 2023 – Close:
A Chicago Soft Red Winter (SRW) wheat futures 70% bounce back from Monday’s lows and long-term lows with a plus-10 cent pop, but not before KC Hard Red Winter (HRW) wheat set a new 3 1/2-year low, followed by its own 23-cent jump. Minneapolis Hard Red Spring (HRS) managed to stay above Monday’s low in early trading, and then it also jumped a dime. The session was languishing slowly lower all night, and then switched to buying at the opening bell of the day session.
It appears that the month-end movement of money will be a feature of the Wednesday and Thursday sessions. There are some large net short-sold positions that are likely profitable and will be banked for month-end book closing.
MarketBullets® Monday, November 27, 2023 – Close:
Wheat has created a signal. A negative one. It wasn’t just Chicago, as KC, Minneapolis and even Paris chimed in. The very old, much tested price floor has been penetrated, and not just be a penny or two. It was a smash! Now we will see if confirmation shows. It’s the most interesting and powerful thing that has happened in months. We will be watching every day for confirmation of a global shift in financial markets as well as grains. Wheat has been seeking a profound low. It could show up in this environment.
Low prices uncover demand. That ultimately will set up a price rally. But it will be a “contra-trend” move. That means extra risk for long-side speculators (including long-in-the-bin speculators). Marketers are in the position of selling at prices that seem ludicrous only a few months ago, but how low is low? There are no rules about the depth of this downward move. Everyone knows it will end and bounce, but no-one knows where that will come. Maybe we are seeing a sign of capitulation! It will not be known until we have a base. “Vee” bottoms, where a new life-of-contract low is immediately followed by a powerful rally are very rare! It will take time to build the launch pad for a rally.
There is moisture in Kansas. Enough? When was it ever enough?, but it looks better at 32% good-to-excellent (GEx) this week. Last year same week they were at 21%. Texas shows 46% GEx and was 21% last year. The PNW is doing fine; WA 52% GEx (LY at 65%), OR 37% this week and 70%(!) LY. Idaho is back where they are accustomed to being, at 82% GEx versus LY at 37%. There is going to be a crop. The market knows it. The national wheat percent GEx is 34% compared to 44% last year. Bumper crop? Probably not. Enough to keep up sales? Yes.
The charts are in charge for a bit. Lets honor their influence. We already now the fundamentals for the week. We will watch southern hemisphere weather and Chinese buying behavior. Meanwhile, Stay tuned.
MarketBullets® Monday, November 27, 2023 – Early AM:
It has been 73 trading sessions since August 15, 2023. In that time the Chicago Soft Red Winter (SRW) wheat futures lead contract has been in a narrow- range, horizontal slide. The entire move has been within 60 cents from high to low ($6.04 to $5.40 per bushel). The present trading activity has been confined to even more narrow lines, as the market grinds and drags across the sensitive historical lows at $5.40. It is so obvious that sell-stops are clustered in layers from $5.40 on downward, that it becomes a kind of carnival guessing game. You know, where the task looks so easy but ends up being impossible. You know it can be done because the Carney has shown you over and over again how to do it.
As of midnight Monday, The market is in the middle of the middle of the range from last week. Sheesh! One of these days the change will come. Meanwhile the end-user buyers are getting the wheat they need without leaning forward, while the cash sellers can pay the bills and still hold in storage for a while longer.
The only drama in the markets is a background factor: The U.S. Dollar is weaker, which makes the other side of the coin stronger: the Russian Ruble and Chinese Yuan have both gained proportionally to the lower Dollar Index. This is making it politically better for Xi Jinping and Vladimir Putin, but not so much for President Biden, although for the U.S. in general it is not as vital an issue as it is for our competitors. For wheat it is a net price positive.
Stay tuned, its too quiet. Doesn’t take long to review status.
MarketBullets® Wednesday, November 22, 2023 – Early AM:
Chicago wheat futures are “reverting to mean” as long-held convictions among folks who study time/data series would postulate. It does happen quite a lot, and is especially useful in a trend-ID-seeking environment. The phenomenon is intuitively obvious and helps to track trendlines of nearly any time-frame, although it is most valuable in longer-term charts. The trendline in Chicago wheat remains slightly lower, with narrow trading ranges.
Country sales of corn have slowed as the cash price has moved below the insurance price floor. Physical wheat is not moving very rapidly into trade channels either. This downshifting eventually has an effect and may be the harbinger of a market base low.
The slide in the Dollar Index alongside the stronger Chinese Yuan and Russian Ruble is the only meaningful factor in U.S. export pricing competitiveness at the moment, although the difference is not large. It is at least a bit of relief from the relentless march higher on the back of lower longer-term interest rates.
A quiet week continues as we will soon be in The Fog of Turkey. Thursday is a no-trade day, and Friday is a half-day at most with many trading desks closed or on skeleton staff. This is where the new hires man the phones while the boss takes a day off. We used to eat popcorn and watch movies in the office on those days (See “Trading Places” with Eddie Murphy and Dan Akroyd, it’s worth watching).
Warning, there are powerful people in the world capable of being disruptive of the market and the Boss’s day off. Small volume days are vulnerable to crazy large orders.
The trend is flat to lower. Check in with your merchant at least to wish him a “Happy Thanksgiving”. Ask him about “April Wheat” (a reference to the movie).
Stay tuned.
MarketBullets Monday, November 20, 2023 – Close: KC printed another new LoC low. Chicago’s low was one (1) cent above $5.40, a multi-year low. The trend is lower, especially if these small lows are validated by closing series below that level.
MarketBullets Monday, November 20, 2023 – Early AM: The holiday week is already displaying a lack of motivation. Chicago is flat, KC is down 3½ and Minneapolis is down about 3. Volume is light.
There is no chart drama, although the markets are all flirting with long-term lows and threatening to open the door to technically motivated selling if those lows give way.
A low-volume holiday week is not always a quiet one, as low-volume markets tend to be more easily moved by headlines (if there are any).
The trendline for wheat in general is lower, but without conviction. The market tone is not anxious, but watchful.
Market-driven interest rates, i.e. 5, 10 and 30-year Treasuries have declined, and the U.S. Dollar Index has also reached new short-term lows, with the Chinese Yuan and Russian Ruble gaining strength in the small time frame. It is not a new trend yet, but is worth monitoring as gauges of other macro-economic markets.
Stay tuned…At least, check-in. We could be headed into an ambush ahead.
MarketBullets Friday, November 17, 2023 – Closing Summary:
Wheat Market WTD MTD Cents USD per bushel
Chicago SRW: -24½ -05½
PNW SWW: -09 -11
KC HRW: -11½ -01½
MPLS HRS: -14½ +07¾
Paris Milling: -16 -08
There were no weekly plus-numbers in the leading contracts of the wheat complex. The only gain month-to-date was in Minneapolis Hard Red Spring HRS) which has been dominating U.S. export sales – such as they are. KC Hard Red Winter (HRW) put in a new Life of Contract (LoC) low on Friday. This market is not trending sideways, it is attacking the recent lows and has some moderate momentum that will require new data or an event of some kind to arrest the negative flow.
This market demands some close attention, as it is in a make-or-break position, with a technical pattern that given a failure of recent lows allows $.50 to $.75 declines until next previous buying support dating back to June of 2020 is achieved. If the recent lows are simply re-tested, followed by a rally above $6.04 in Chicago (for example) it may be enough to trigger buying by the funds. The next week or so of trade should be very interesting.
The fundamentals of wheat have not changed, with the only potential shifting in supply dependent on southern hemisphere crop condition and harvest weather.
If there is a hint of change in the global markets, it is coming from a weaker U.S. Dollar Index, stronger Chinese Yuan (not covered by the Index) and stronger Ruble. Related to this is the break in interest rates that is emerging. The implications of these changes for U.S. wheat demand are indirectly price-positive, and may be harbingers of other macro market changes.
It is time to be watching closely. Stay tuned.
MarketBullets® Friday, November 17, 2023 - Early AM:
Egypt is the world's largest wheat importer, at some 16% of global purchases, relying on volume global wheat suppliers, including Russia, the European Union, Ukraine, and Australia, with wheat consumption estimated at 20.6 million mt in 2023/24.
Of late, Egypt often purchases from Russia and Ukraine but has also procured from Australia, Brazil, Bulgaria, France, Germany, Lithuania and Romania. Once the main supplier of wheat (Including soft white wheat) to Egypt in the 1980’s, the U.S. is no longer on the supplier list. A big part then of the reason for U.S. sales into Egypt and other Indo European buyers was the GSM-102 Credit Guarantee Program. Today, much of the Egyptian wheat purchase activity has been facilitated through loans from the International Islamic Trade Finance Corporation and the World Bank. They have recently signed what appears to be an ag procurement contract with UAE-based agribusiness Al Dahra and the Abu Dhabi Exports Office (ADEX). For now, given the sanction-depressed prices offered by Russia and some economic stress within the Egyptian economy, U.S. wheat will have to be sold elsewhere.
As of midnight Thursday, heading into Friday’s trade, the U.S. wheat futures markets have put in a net negative week; Chicago SRW -20 cents, KC HRW -14, Minneapolis HRS -4, and then Paris Milling Wheat minus $.18. PNW white wheat closed Thursday down a dime through December delivery at $6.75. Early AM Friday markets were very narrowly mixed, trading quietly.
Energy prices have been dropping over the week. Diesel prices, often stronger as the heating season cranks up furnaces, have been flat to only slightly positive at about half of what they were last November. The longer-term interest rates have paused in their strong upward trajectory. This kind of stuff is what we usually see ahead of a business slowdown. For wheat, it is not directly negative, but there are decisions that will be affected.
The wheat price trend is flat to negative, with no obvious new factors looming. There will be a bounce, but like all price bounces, they may start from lower prices than today’s level. Holding wheat in storage this year has not paid well, and the trend has not changed.
MarketBullets Thursday, November 16, 2023 – Early AM:
Via Facebook (November 15, 2023), confirmed by Institute for Study of War (ISW) and others:
“The Ukrainian government reached a deal with international insurers that will provide affordable coverage to vessels carrying grain and other critical food supplies through the Black Sea corridor for civilian vessels, amid continued Russian efforts to deny navigation through the corridor. The Financial Times (FT) reported on November 15 that the Ukrainian government reached a deal with insurance broker giant Marsh McLennan to provide up to $50 million in hull and liability insurance from Lloyd’s of London firms for each vessel carrying agricultural goods.[9] Ukrainian Prime Minister Denys Shmyhal stated that this agreement would allow Ukraine to “provide vital food supplies to the world at the same time as supporting the Ukrainian economy and keeping the Black Sea open for international trade.”[10] Russian forces have continually conducted strikes on Ukrainian port infrastructure and mined areas in the Black Sea to deny freedom of navigation in the corridor.”
The above is not a wheat price-positive factor, but in the long run, a healthy Ukrainian economy is better for the U.S. than a Putin-dominated one, including wheat and other grain exports that are potential food weapons.
Also according to a Reuters article on November 15 (and not a directly relevant wheat market factor):
“Israeli forces conducted a reconnaissance operation into the al Shifa Hospital complex on November 14-15 to obtain information about the Hamas tunnel network Israel says is under the complex.”
So far, no significant information about what they found in or under the hospital in Gaza has emerged except for some photos of a minor cache of weapons in an unidentifiable location.
The meetings between Presidents Biden and Xi Jinping have not created any major market-moving breakthroughs, although ahead of the summit in San Francisco on Wednesday, China has been buying soybeans at a rate that has helped push that market into new highs. As a wheat price factor, this is a background item that bears a mild market-friendly tone.
Russian wheat planting is nearly complete, with expectations for a record wheat-sown area heading into 2024.
The Chicago wheat market is still the go-to bellwether for global wheat market observers. Soft Red Winter (SRW) U.S. domestic wheat fundamentals are softer than the hard reds, but the trendlines remain tightly bound together. Chicago is in a short-term negative swing in the context of an expanding sideways channel. There is no technical sign of a change in that pattern this week so far. The early AM trade is slightly down, about 2 cents lower at the midnight hour. The first key trigger price below current trade is about $3.54½. If that level fails, the next sensitive price is at $5.40, a long-term low last touched on September 29, 2023, dating back to September of 2020, likely to attract market selling attention if it fails.
MarketBullets Wednesday, November 15, 2023 – Close:
In U.S. markets, Chicago wheat futures (down 11 cents) were by far the the weakest in the complex. KC was only down 1/2-cent, Minneapolis cut 3/4-cent, and PNW white wheat ignored the market entirely, but in Paris the lead contract was off about $.10 per bushel if translated from Eurocurrency to USD. PARIS, Nov 15 (Reuters) - FranceAgriMer on Wednesday raised its forecast for French soft wheat exports outside the EU in 2023/24, but also lifted its season-end stocks estimate to a six year-high on lower forecasts for intra-EU shipments and domestic livestock feed demand.
The fundamental reasons for wheat’s weaknesses are simple: too much soft red wheat for sale in a world market where U.S. shippers are out of position to compete well, and an improved prospect of more wheat in the next northern hemisphere in 2024. The technical drivers that could trigger fund trading money into buying back their somewhat large short-sold positions are not on the charts. Even a “normal” retracement would be significant in proportion to the recent downward move.
Chicago wheat lead futures contracts are now within 25 cents of their September 2020 level at around $5.40, which is the top-end of a series of previously significant buying support levels stretching back to 2016 and $3.59 per bushel. (see Long-Term chart here).
This next few weeks or months of marketing wheat will require some thoughtful use of pricing tools and deliberate decisions. Time to keep the line to your merchant warm considering the alternatives. Stay tuned to this channel.
MarketBullets Wednesday, November 15, 2023 – Early AM:
Kansas City Hard Red Winter (HRW) wheat futures have declined compared to Chicago Soft Red Winter (SRW) by over 75 cents per bushel in the last 30 days. This has brought the relationship between the two contracts back to its mid-February level that had then not fully reflected anticipated short HRW and generous SRW crops. Since then, abundant Russian 12.5% bread wheat and some unexpected demand for SRW has brought the spread back to near “normal”, with KC commanding a 67-cent “premium over Chicago versus the historical high of $1.82 last May. This is more like what we will look for in the coming year. For wheat marketers, tracking this and other spreads provides background data that can help discern when the markets are weak or strong.
Winter wheat crop conditions declined just a few percentage points in the U.S. reminding the market that there are still regional moisture shortage issues that will make this winter’s precipitation a very sensitive issue going into next spring. The weather factor is still going to be a big driver as large portions of U.S. wheat production emerges from a couple of years of severe drought. Wheat price positive.
The U.S. Dollar Index has dropped a couple of percent just in the last month, making U.S. wheat export prices more competitive, and taking some of the pressure off of Russian and Chinese governments, as the Yuan and the Ruble have both recovered some value. A wheat price positive.
Diesel prices have eased in a whip-saw fashion to the $2.80 per gallon levels last seen in July, coming off of the highs around $3.50 NY Harbor in mid-September. The 43-session (about 9 weeks) trend in diesel remains lower for the moment.
Guvmint data shows consumer prices in the U.S. were unchanged in October and the annual increase in underlying inflation was the smallest in two years. It may not feel like it at the grocery store, but at least the upward surge in cost of living is slowing. It is not however, likely to be “transitory’. Prices will not go back down to what they were.
The trend in wheat prices is flat. The range of trade is narrow, which at least allows a clear definition of change when it finally emerges from the sideways pattern that has held on since mid-August of 2023. Stay tuned. If there is a change we will be able to see it.
MarketBullets Tuesday, November 14, 2023 – Early AM: We have the wheat market staked out, but the suspect is asleep. Corn and Soybeans staged a powerful upward parade on Monday, but wheat snoozed and barely acknowledged the sister markets.
Scraping the barrel for news:
Beans, driven mostly by recent rapid Chinese buying, were up 37 cents Monday, but as of midnight heading into Tuesday’s session were off 8 cents. Corn was up 12 Monday and off 2½ in very early trade Tuesday morning. Chicago and Minneapolis were both down 1½, while KC was down 3½. The slight warming of Chinese/U.S. relations is having at least some positive effect on grain markets.
U.S. corn and soybean harvests are proceeding apace, on schedule. French winter wheat seeding is falling behind due to excessive moisture. Ukraine’s seeding is also on schedule, although quite a bit smaller than pre-war numbers. Argentina wheat harvest, about 15% completed, is revealing lower yields than hoped.
Anhydrous ammonia prices are on the rise, although natural gas prices (nat gas feedstock) are still half of what they were last November. Anhydrous is quoted at around $826/ton, midwest, up about 5% from last month.
U.S. wheat export inspections have been a bit stronger, still dominated by Hard Red Spring (HRS) and Soft White (SWW).
The wheat price trend is stable - sideways to lower, even with bargain hunters sniffing for price lows and a harvest rally in the corn and beans. Day by day, the wheat complex is laying out the base for a better price trend later. For the moment, we can just eat donuts while we watch for suspect movement. Stay on this frequency for updates.
MarketBullets Monday, November 13, 2023 – Early AM: Veteran’s Day (A Federal holiday) was officially observed on Friday, November 1, but the Wheat markets, along with other exchanges, stocks and bonds, were open and active. The World War I armistice was signed at 11:11 on the 11th day of the 11th month in 1918.
Once again the wheat market has reverted to a 57-day mean, based from the trading range since mid-August. “Reversion to the mean” is a long-experienced and familiar pattern. The trend remains lower, not because there is bad news, but because it is the path of least resistance. There is no significant factor that pushes toward price-rationing of wheat.
KC Hard Red Winter (HRW) wheat futures at midnight on Sunday were down the same amount as Chicago Soft Red Winter (SRW), and were within a dime of their multi-year lows. Minneapolis Hard Red Spring (HRS) were down about 3 cents and slightly less negative in slope.
Angie Setzer at Barchart does a very nice roundup of factors on Sundays in her “Sunday Scaries” piece. This week the mention of Chinese buying of U.S. soybeans and some earlier purchases of SRW wheat earlier was a succinct statement of why China is buying now. Give her a click!
Sunday night trade in wheat was flat-to-negative with no suggestion of change in trend. Stay tuned “just in case”. It’s like watching for crop changes, not much drama, but interesting just the same.
MarketBullets Friday, November 10, 2023 – Closing Summary:
Wheat Market WTD MTD Cents USD per bushel
Chicago SRW: + 2 3/4 +19
PNW SWW: -11 +27
KC HRW: - 3 3/4 +10
MPLS HRS: +11 +22 3/4
Paris Milling: -3 3/4 +8
Brazil’s wheat crop estimate by CONAB (National Supply Company) has been cut again by 8.7% from last month’s report due to continued excessive rains, while Argentina’s wheat production is also below last year’s. Australian wheat expectations are forecast to decline by 36% to 25.4 million metric tonnes in 2023–24, below the previous 10-year average of 26.4 million tonnes a 3.7% reduction, not enough by itself to trigger the funds into covering their short-sold positions.
USDA’s World Ag Supply/Demand Estimates produced no statistics in wheat that were price-friendly. Corn production figures for the U.S. were increased due to much higher yield projections virtually across the board, a wheat price-negative sympathetic factor.
The price environment is not heavily bearish, but without factor(s) that could trigger a move higher in the market’s eyes, the price path of least resistance is sideways with a slight negative tilt.
The best way to take advantage of a market that is flat between two well-defined boundary prices, is that penetration of those bright lines on either the lower edge or the upper constitute a warning signal of change. A clear-cut close above the high side in Chicago wheat (about $6.04 in December futures) is a useful signal, as is a failure to hold above $5.40. In either case, a benchmark may be established by which to measure market strength or weakness.
The week in wheat prices was narrow, indecisive-mixed. For the month-to-date, the wheat complex net is positive so far. Stay tuned for changes. Hit the “Get Updates” button to receive email alerts when charts and comments are updated. Stay tuned.
MarketBullets Friday, November 10, 2023 – Early AM:
Things that are known: The price trend across the wheat complex is sideways to negative.
Storage is getting more costly (interest rates and limited storage space availability in some areas). Wheat is not money. It does not earn interest. In storage it represents risk. This promotes more selling volume. Price negative.
Southern hemisphere wheat crops have been shrinking and are expected to result in below trendine production. Price positive.
Russia is going to continue to be aggressive in export sales below market “normal” price, and early planting and growing conditions are good. Price negative.
U.S. domestic winter wheat production conditions are better this season than they have been for the previous two seasons. There is a crop coming. Price negative.
Regional wars have been dominant factors this year. Ukraine is in a non-trending pattern, although if this is continued very long, time favors the Russian. Israel versus Hamas and apparently Hexbollah along with Iranian regional proxies shows potential to become a much wider and more dangerous issue for global economics (not to mention millions more lives). Markets do not like disruption. Price negative.
That’s five (5) price negatives and one (1) price positive. This is why the wheat market price is not rising. Each of the factors are subject to change, and other factors may emerge at any point. For now the general influence on wheat prices is unfavorable.
This stuff is trackable. We track it. Stay tuned.
Stay tuned. The tracks of the market beast will reveal its direction long before the news catches up.