Commentary
Wheat continues to find support from declining production estimates from Russia, while the Ukraine crop is now under stress as well. IKAR, which is the Russian version of the USDA cut its forecast for Russia’s wheat crop another 2.5 MMT to 83.5 MMT after a “more exact assessment of frost damage and dryness across the south.” Total grain production is now forecast at 132 MMT, down 3 MMT from its prior outlook. The recent freeze damage created the noise and as a result the short covering by managed money, but drought maybe the biggest culprit as crop scouts have stated that moisture deficits to date have reduced production potential across southern Russia, and now the eastern three-fourths of Ukraine’s wheat belt. Furthermore, excessive rains are delaying planting of Russia’s spring wheat crop, which typically makes up nearly a third of its production, raising concerns of losses there as well. There may also be fears that the new Russian offensive could reduce fieldwork in affected areas and reduce overall production. Chicago open interest gained 8K contracts while KC wheat gained 4K. There isn’t much relief in sight for drought-stricken areas in Eastern Europe in the next week to ten days. My opinion is that breaks should be well supported. The next targets tot the upside are these three levels. Resistance is 715, the 200-week moving average, then 721, which is 15% higher on year. We close above these levels, I think funds push this to 7.52, 200 percent higher on the year. Support is at the 100-week moving average at 6.84. A close below and the market could retest 6.59 and the weekly low at 6.54.
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