Volatile price action, weekly reversal down
Wheat had a wild week, spiking up to 8-month highs on Monday only to get pummeled on Wednesday. Buyers stepped back in on Thursday, recovering about half of those losses only to give them back on Friday. After all was said and done, we had a weekly reversal down and it looks like a pretty safe bet that the seasonal highs are in place.
That said, it was an impressive move higher which went well past the normal seasonal time window. Funds were aggressive buyers as long as the dollar was moving lower. But that changed this week, too, as the dollar had a weekly reversal higher after an extended break. It the dollar manages to continue moving higher, it will add an element of bearishness to grains.
But for now, the grain complex is well supported, particularly soybeans as demand for evaporating old crop supplies remains very strong. Corn is also finding some strength as planting season closes down with too many acres still not seeded. We'll likely see more bean acres as a result, but that has not stopped soybeans from making new 9-month highs. The funds have been aggressive buyers of the grains, and they've been willing to step up and support the pullbacks.
Export sales were small, as expected. This latest rally pushed US prices well above world prices and sales dropped. The swift sell-off brought in some small buyers, but we can expect that competition will remain high as the Northern Hemisphere has large old crop stocks and is in the early stages of harvest.
China has begun their winter wheat harvest, and is expected to cut another bumper crop. They are reportedly about 50% down with winter wheat harvest. Here in the US, winter wheat harvest is moving along although you'd hardly know it as the bushels simply aren't there in TX and southern OK. The trade expects much more harvest pressure as we progress further north where yields and quality look much better.
Informa reported that they expect total US winter wheat production to be 1.513 billion bushels, just above the last USDA estimate of 1.502 billion bushels. USDA will release their monthly supply/demand report on Wednesday, June 10. The trade will be much more focused on what they project for corn and soybeans.
Spring wheat continues to have its share of problems, with still some planting delays in the northern Plains and now Canada showing serious signs of trouble. First it was too wet in the Manitoba region just north of North Dakota, and now we have drought conditions in the western Plains of Alberta and Saskatchewan. Frost, late in the week, looks to have done some damage as well. Rains are forecast for the western Plains and the trade will be watching closely to see if they materialize.
Technically, the weekly reversal down should set the tone for the near term; wheat will likely have trouble with rallies and generally move lower through the harvest season, which this year will stretch into July due to the slowly maturing crop. On the Chicago July futures, the first layer of support rests at 6.05, then 5.96 and then on down to 5.63. Resistance will show at 6.43, then 6.58, with the major resistance at the high of 6.77.