Wheat prices are trading around 2% higher today and over 12% higher over the course of a week. There are two main stories at play that are driving grain prices higher. The first one is the future of the UN-brokered Russia-Ukraine deal on Black Sea grain exports while the second one is data on the condition of US crops.
Russia continues to stress that part of the deal relating to restarting the ammonia pipeline or reconnecting one of Russia's banks to SWIFT system is not being fulfilled and because of that it does not see neither reason, nor possibility of extending it beyond the current deadline of July 18, 2023. However, it should be noted that the Black Sea deal extensions have been for 2 months so far and Russia has also threatened not to extend the deal before. Nevertheless, the deal was extended each time and one cannot rule out that Russia is now trying to win some concessions from the West with its threats to walk away from the deal.
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Open account Try demo Download mobile app Download mobile appAnother reason behind recent upward pressure on wheat and other grain prices is data from the United States. Recent dryness in the United States led to a deterioration in crop quality. Share of spring wheat in good to excellent condition dropped from 60 to 51%. Share of corn in good to excellent condition dropped from 61 to 55% while the share for soybeans dropped from 59 to 54%. Also, it was reported that persistent rains in the southern parts of Russia, also a major wheat player, threaten to lead to deterioration in next season's crop quality.
Taking a look at WHEAT chart at D1 interval, we can see that the price experienced strong gains recently and is now trading around 24% above a low reached at the turn of May and June 2023. Price is approaching a mid-term resistance zone in the 720 area that saw numerous price reactions over the past two years. A break above would lead to painting of a higher high - a potential break in the downtrend sequence. Nevertheless, price would need to climb above 795 mark for trend reversal to occur according to the Overbalance methodology. Traders should keep in mind that contract rollover will occur on WHEAT tomorrow and current futures markets quotes suggest it will lead to a price jump of around 14 cents per bushel.
Source: xStation5
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