Grain Spreads: Explosions Send Wheat Higher

Sean LuskGeneral Commentary

Commentary

Tit-for-tat Ukrainian and Russian attacks have marked the ongoing War in the Black Sea area lately. But these attacks overall have done little to halt the price slide caused by plentiful global wheat supplies amid weak demand for North American origin the last three weeks. Since the high on July 27th at 929, KC wheat has lost 1.90 in value in less than 3 weeks. A steep drop. Therefore, I see today’s rally as nothing more that profit taking into the weekend. That said markets started higher from the onset of last night’s open and continued through today’s session.  Strength was led by Chicago wheat with KC and Minneapolis following. There was an isolated report of a fire at a cargo/oil terminal in the Russian port of Novorossiysk early this morning may have contributed to the buying that has been seen but some profit taking/short covering shouldn’t be rule out. Also, there were drone attacks on Moscow overnight and now going into the weekend trade will want to see what type actions the Russians take in response potentially. What to do? Trade the charts. I attached a weekly KC Chart. The market held key support from the downward trendline at 7.53 this week. While we settled below this are twice this week, we finished the week above it, holding support. That line moves to 7.47 next week. A close below and Dec KC wheat could push lower to the next level of supports at 7.26, 7.22 and the 200-week moving average. A close below the 200 MA and its katy bar the door to 6.84. Holding support is one thing this week, but to turn friendly, Dec KC needs a closer over 7.87 next week. (Upward trendline). Should that be achieved look for the market to retest 8.00.  a close over 8.00 and the potential exists for a rally to 8.44, the five percent down for the year threshold. 

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Sean Lusk

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