CNS Canada — U.S. wheat futures posted some big gains over the past three months, but now find themselves right back where they started and could be due for more weakness as the futures have filled a gap on the charts.
CBOT wheat futures gapped higher on March 3, as Russian troops entered Crimea and concerns over the political situation in Ukraine, which is a major grain producer, triggered a rally in wheat.
The rally on the first trading day of March left a gap on the CBOT July wheat chart between US$6.10 and $6.16 per bushel.
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The contract eventually hit a high of US$7.44 per bushel in early May, but has since declined to refill that original gap in the first days of June.
Easing tensions between Russia and Ukraine were behind some recent weakness in wheat, said trader Austin Damiani of Frontier Futures in Minneapolis.
World wheat prices were also drifting lower, especially in the Black Sea region and France, which has spilled over to weigh on North American values, he said.
Damiani said wheat could find some support around current levels, amid oversold price sentiment, but added that fund traders were moving to the short side on wheat and the longer-term support for the July contract doesn’t come in until the US$5.60 area.
In addition to the bearish technicals, the U.S. winter wheat harvest will be picking up over the next month. Damiani noted wheat often comes under seasonal pressure at this time of year, although traders will also be watching yield reports closely given the drought concerns in some areas.
Dry pockets in some Russian wheat-growing areas were also be followed by wheat traders, he added. [Related story]
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
