Wheat and corn under pressure from higher supply and erasing weather premium📉
Wheat futures retreated nearly 4% today, although the sell-off at one point reached nearly 5%. After a crop-friendly June, weather forecasts suggest warmer weather in mid-July, which at this stage supports bearish sentiment in wheat and corn contracts. Also, the stabilization of the dollar, after last week's weak week for the 'greenback' supports profit taking in the agricultural commodities market.
- Although both rains and hot weather are expected in some regions of the US - the market sees no significant threat to yields, from weather factors. Positive supply trends can also be seen in export data. According to data released by the Department of Agriculture, U.S. wheat exports rose 1.7% to 341,000 tons last week.
- Also, the weather in Russia and Canada, has definitely improved in recent weeks, driving wheat contracts to levels close to $560 per bushel. Volatility in the market may increase on July 12, when the USDA releases a report reporting on current crop progress; it is the optimistic supply estimates that are putting pressure on the grain market today. As a result, much of the upside driven by a weakening dollar and strong US exports was erased today.
- Volatility in the agricultural commodities market could also increase on Thursday, following the release of CPI inflation for June, from the US; a weakening dollar would potentially support a rebound in wheat futures. Lower-than-expected inflation could theoretically weaken the dollar, while higher-than-expected data could strengthen it, weighing on the premium in quotations of 'soft commodities' like wheat and corn.
- Analysts at StoneX pointed to further risks from the Russian market, where problems with officially falling supply in recent months have not translated into lower wheat export prices; these are still very low, and import demand itself looks weak. This raises additional concerns about oversupply in the market
- So far, Kazakhstan's weather season represents perfect conditions for the wheat harvest. New MARS estimates from the EU suggest that Kazakhstan's wheat supply will increase to 17 million tons this year from about 12 million. 2023, with 1.33 t harvested per hectare vs. 0.92 for the 2023 season and 1.07 5-year average).
WHEAT (D1 interval)
Wheat contracts are losing more than 4% today. The price has virtually erased July's gains, and today's market movements reinforce the sharp downward trend that has continued since mid-May. Quotations today pierced the support level established at $575 and headed toward local minima set by the June lows at $557. Breaking through the next support could be a bearish signal for discounts towards $526.
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Source: xStation5
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