Commentary
The short covering is all the rage in the grain markets lately, with wheat leading the way while breaking out of the range that has contained it since July. Fundamentally, there isn’t a reason in my opinion that has abruptly entered into the market as Russian values hold steady and there are large tenders upcoming. Drought in portions of the U.S. Southern Plains and in the Black Sea Region raise concerns for next year’s winter wheat crop, but in my view, it may be difficult to sustain a rally at this point based on Black Sea dryness when the cash market in that region remains quite weak as exporters seek customers. That being said, KC wheat has now closed higher for 7 consecutive sessions with Chicago and Minneapolis now higher for 6 consecutive sessions. It appears that markets are now shifting focus to the demand side of the equation as harvest in the US and Black Sea look to wrap up. US has a decent number of sales on into early 2025 and while Russian values remain steady. If cash markets turn bid and move higher in Russia and Eastern Europe, then the path of least resistance is higher in my opinion. Grain prices have been battered since Memorial Day weekend and crop sizes and production smaller in major growers (EU, Argentina, Russia) this past year in regard to wheat. There are questions moving forward and with corn and beans going bid for now, short covering is featured. As always trade the charts. Major resistance for Chicago wheat is at the 50-week moving average at 585 and then 5.89 the 21-week MA. A close above this area and 5.90 and the market moves to trendline resistance at 6.15 and then 6.28. A close under 5.66 in my opinion could ignite more downward pressure and could push the market to 5.35 basis December futures.
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Sean Lusk
Vice President Commercial Hedging Division
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