Commentary
All wheat classes broke today on 3 different fronts in my opinion. First, Canadian farmers intend to plant 27.0 million acres to wheat in 2023, up 1.58 million acres (6.2%) from last year, according to Statistics Canada (StatCan). Spring wheat area (+7.5% to 19.4 million acres), durum wheat area (+0.9% to 6.1 million acres) and winter wheat area (+12.7% to 1.5 million acres) are all expected to increase in my view. If realized, Canadian wheat acres would be the highest in more than two decades. Second, wheat prices came under additional pressure today after portions of the southwestern Plains received some of the best rains they’ve seen since July, with more in the forecast. The current system is very slow to move out of the region, bringing more rain potentially in the days ahead, with a second system expected to reach the region in the 6-to-10-day forecast. Third, Russia is demanding a systematic decision to reconnect the Rosselkhozbank to SWIFT and is against this decision being made on a case-by-case basis. Reuters reported earlier today that JPMorgan Chase & Co received permission from the US government to process payments for the Russian Agricultural Bank. Russian sources claim this is not a substitute for reconnecting to the SWIFT system. The UN confirmed grain was traded and JPMorgan did process a payment. The trade was denominated in US Dollars. In summation, better weather in western wheat belt where moisture is sorely needed, higher wheat plantings in Canada, and for me a surprise sale out of Russia that maybe a one-off sale that side steps the sanctions. The news was bearish at least for today. Technical levels for Chicago wheat through next week come in as follows. Support is first at 6.41. A close below and it is 6.33. A close below 6.33 and the market could test 6.23 and 6.10. A close under 6.10 and its 5.93, (25% down for the year.) Resistance isn’t seen until 6.73. A close over and its 6.90 and then 6.96. To turn the trend up, the bulls need a close above 7.12. Daily chart below. Managed funds have pushed out to a net short of approximately 130K contracts in my view. A sizable, short historically for the Chicago contract, that seems to be nearing the record managed short of 171K last decade.
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