Wheat fails to confirm reversal
Wheat had a reversal up on Thursday of last week, but it was on low volume and Friday could not confirm it.
The market has the look and feel of wanting to move higher along with the normal seasonal tendency, but is struggling to establish that upward momentum. It appears that Kansas City still has more long liquidation to do.
Export sales continue at a steady pace, with another 383,000 MT sold the week prior, within the range of trade estimates. India finally confirmed the purchase of its 1.67 MMT, and as expected none from the US. Egypt tendered late on Friday, but then cancelled that tender on Monday morning because prices were too high. There is plenty of business being done around the globe, but price rallies create a definite drop in interest.
Weather is still on the forefront of traders' minds, both here and abroad. Rains continue to fall in the southern plains, with moisture levels significantly improved for fall planting season. Odds are very good that we'll see a large increase in planted acres for hard red winter wheat.
We're also closely watching weather conditions in Argentina and Australia, both of whom have had poor starts to their planting and now growing seasons. Light rains have fallen in key growing areas, but much more is needed to help the crop recover to what it can potentially be at this point. Private forecasters in Australia are projecting 15-16 MMT, down from last year's 24.5 MMT.
Argentina's production is also important as they raise quality hard wheat and are coming off of a short crop last year. Brazil typically buys most of their wheat from Argentina, but this year had to go into the world market for some of their needs, illustrating how tight Argentina's supply situation was last year.
USDA will issue their monthly crop report on Tuesday. The trade is expecting more corn and bean production, but US wheat production will likely see minor changes. However, world wheat production will likely see another drop, with Australia, Argentina and the EU all due for a downward adjustment.
Technically, the low volume reversal on Thursday followed by Friday's failure to confirm the reversal was a disappointment for those looking to regain some upward power. The market has tested support levels and the seasonal is usually up at this time of year, so we'll see if those lows from the reversal can hold.
Look for support in KC Dec at Thursday's reversal low of 4.70, then the trough at 4.68 followed by the swing low of 4.54. Resistance should show at Thursday's high and trough at 4.845, followed by the swing high of 4.39. In Chicago Dec, look for support at Thursday's low of 4.11, then the breakout at 4.085, followed by the trough at 4.07 and then the swing low of 4.00. Resistance should show at Friday's high of 4.23, and then the swing high of 4.29.
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