Low supply: will wheat price continue rising?

January 12, 2018 11:18 AM

General Comments:  U.S. markets closed a little lower yesterday in consolidation trading. Prices remain generally firm on ideas of reduced planted area for Winter Wheat this year. The funds remain very short the market and have been covering a part of these positions. It remains dry in most of the Great Plains, and temperatures are cold again. The crops in the region are not well established. There are no forecasts for significant precipitation in the Great Plains for now. Less concern was heard about Midwest crops as these crops have had snow cover, although the snow is melting this week. 

The Midwest is also turning colder again, although no extreme cold is forecast. The daily and weekly charts show that winter wheat trends are turning up. Minneapolis is showing up trends on the daily charts. USDA will issue its Winter Wheat plantings reports along with new supply and demand estimates tomorrow. Price Group expects all winter wheat area at only 30.65 million acres. Hard Red Winter area could be 21.89 million acres and Soft Red Winter area could be 21.89 million acres.  Quarterly stocks could be about 1.835 billion bushels, and USDA should leave its ending stocks estimates unchanged at 960 million bushels. 

Overnight NewsThe southern Great Plains should get mostly dry weather. Temperatures should be below normal.  Northern areas should see mostly dry weather. Temperatures should be below normal. The Canadian Prairies should see mostly dry weather. Temperatures should average much below normal. 

Chart Analysis: Trends in Chicago are mixed to up with objectives of 462 and 486 March.  Support is at 429, 424, and 421 March, with resistance at 437, 443, and 445 March.  Trends in Kansas City are mixed to up with objectives of 446, 462, and 464 March.  Support is at 436, 431, and 424 March, with resistance at 442, 451, and 486 March. Trends in Minneapolis are mixed to up with no objectives.  Support is at 628, 621, and 617 March, and resistance is at 634, 646, and 651 March.

General Comments:   Rice prices closed lower in light volume trading and in response to a very poor week of export sales.  Net sales were just over 1,000 tons due to weak demand and a cancellation of 15,000 tons from Iraq. Trading is slow as the market waits for the USDA reports that will be released this morning and as the domestic cash market remains slow.  The situation for Rice remains somewhat bullish at this time. USDA will issue its latest production and supply and demand reports on Friday.  Little overall change is expected in production.  Demand has been at least as strong as expected and USDA could increase export demand slightly and reduce ending stocks slightly.  

Overnight News:  The Delta should get rain and snow today, then dry weather. Temperatures should be below normal again. 

Chart Analysis:  Trends are mixed to down with objectives of 1160, 1142, and 1135 March. Support is at 1170, 1161, and 1157 March, with resistance at 1185, 1195, and 1200 March.

Corn and Oats           
General Comments: Corn closed near unchanged once again. Prices remain near the bottom end of the recent trading range.  Oats were firm and trends are still mostly up. There are hopes for increased corn demand from the export market due to cheap prices, and ethanol demand remains good overall as energy and petroleum prices move higher. The trade continues to monitor the dry weather in southern Brazil and Argentina, and opinions are mixed. 

Forecasts for this week are mostly hot and dry, but some showers are possible in the driest areas of Argentina and southern Brazil next week.  Some crop losses are increasingly possible and the La Nina conditions imply short soil moisture conditions for most of the growing season. USDA will issue its latest production and supply and demand estimates at the end of the week.  Price Group expects USDA to estimate corn production a little lower at 14.453 billion bushels on a yield of 173.9 bushels per acre. Ending stocks should be near 2.263 billion bushels. 

Overnight News:  Unknown destinations bought 320,000 tons of U.S. Corn.

Chart Analysis: Trends in corn are mixed to down with objectives of 345 and 341 March. Support is at 347, 343, and 340 March, and resistance is at 352, 354, and 360 March.Trends in oats are mixed to up with objectives of 255, 260, and 264 March.  Support is at 260, 247, and 243 March, and resistance is at 254, 257, and 260 March.

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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.