Morning Wheat - Better Australia Weather but US Too Dry; Russia May Export Less
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Weakness in European wheat futures plus more talk of better weather for the Australian harvest are seen as short-term negative forces. Russia is considering reducing its export quota slightly from the previously planned 9 million tonnes, and this could provide some underlying support. With the oversold condition, the market looks set to see a significant recovery bounce, but it may need some type of catalyst. The European crop monitoring service MARS indicated that most crops in Europe have continued to benefit from favorable weather in the past month, although a lack of heartiness could leave some plants vulnerable to frost. However, conditions for the central and southern US Plains remain quite dry. While it is not necessarily the time of the year when dryness can cause a major crop problem, conditions continue to be dry. In the last 14 days, there has been very little rain in Kansas, Oklahoma, and northern Texas. The forecast for the next 14 days is also very dry, with above normal temperatures.
March wheat closed slightly lower on Tuesday with an inside trading day. The market experienced choppy and two-sided trade early, but a jump in the US dollar and weakness in outside market forces triggered selling. The stochastic crossing over from a reading down near 20 reading is a bullish technical development. The inflationary tilt to commodity markets may also help support after the 106 ¾-cent break off the November 24 peak. In the current food security environment, export restrictions from Russia or higher taxes may emerge to support the market at any time.
Market Ideas
With an inflationary tilt to commodity markets, continued high export taxes from Russia, and the oversold technical condition of the market, look for at least a technical recovery bounce. March Chicago wheat support is at 768, with 808 ¾ and 821 ¼ as key resistance levels. July Kansas City wheat support is at 786 ¾, with 816 ½ and 827 as resistance. Consider buying July KC wheat on a setback.
