Wheat prices face pressure from global growers

Egypt is tendering for wheat today, and traders will monitor results closely.

With Chicago wheat already holding a big premium to the Kansas City wheat market and the U.S. now in a position to have to compete with Black Sea wheat, a further drop is likely for the Chicago contract. 

Both Kansas City and Minneapolis wheat moved to new contract lows yesterday, while September Chicago wheat was still 37¢ above the June 26 contract low. This along with a sharp selloff in the other grains could spark further weakness in the market, as U.S. wheat will need to be cheap enough to avoid revisions lower in exports.

Egypt is tendering for wheat today, and traders will monitor results closely. September wheat closed sharply lower on the session and experienced its lowest close since July 7. The close under $5.11 for September wheat is a bearish technical development. 

European wheat futures fell to a one month low, as increasing expectations for a large Russia harvest helped to pressure the market. The smaller crops from France and Romania helped to support the rally in July, but the higher than expected yield results from Russia has been enough to offset.

Traders see the drier weather in Germany this week as a reason to suspect increased harvest pressure. German officials see the crop this year at about 20.23 million tonnes, down 12% from last year. The French farm ministry this morning lowered its estimate for this year's wheat harvest to 29.71 million from 31.31 million estimated last month. This would be down 25% from last year and 16% lower than the average of the past five years. 

Market ideas

Look for continued selling ahead. September Chicago Wheat short-term resistance is at 511 Ω and 518 º, with 501 æ as next support. Don't rule out a test of the 471 contract low. The downside breakout for September KC wheat will leave 408 1/4 as next support. September Minneapolis wheatís downside target is 498 1/4.

For daily updates on cattle, hogs, corn, wheat and the soy complex, visit https://www.hightowerreport.com.

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