Commentary
Wheat was sharply higher today as tensions between Russia and Ukraine escalated overnight. The headline driving the strength in my opinion were reports of a drone strike at the Kremlin and while this jolted the markets higher, the bigger concern for traders will be what retaliatory actions will Russian take against Ukraine in this situation. Russia blames Ukraine for a failed assassination attempt of President Vladimir Putin in an overnight drone attack. Ukraine claims it had nothing to do with the attack and says Russia could use it as a reason for another attack in Ukraine. Russia’s claim was made without evidence. A Turkish media outlet claimed Russia, Ukraine, and Turkey would discuss the Black Sea Grain Deal on May 5 in Istanbul. Russia’s Foreign Ministry fired back claiming grain deals talks are not confirmed for May 5. For KC wheat the timing couldn’t be better in my view given the oversold conditions following the $1.30 loss over the past couple weeks and the increasingly short fund position. Funds came in short today in the volume heavy Chicago contract at approximately 128K futures and options contracts. The record net short is 171K. Domestically, crop scouts this week projected Oklahoma’s drought-damaged winter wheat crop at 54.3 million bu., with an average yield of 24.6 bu. per acre, following an annual tour of the state. However, the average wheat production estimate among members surveyed at a meeting of the Oklahoma Grain & Feed Association was much lower at 40.7 million bushels. In 2022, Oklahoma produced a winter wheat crop of 68.6 million bu. on an average yield of 28 bu. per acre. Technical levels for KC wheat through next week come in as follows. Support for July Kc is first at 7.78. A close under and its 7.56. A close under 7.56 and its 7.40. A close under 7.40 and its katy bar the door to 7.12. Next resistance is 8.00. A close over is needed to trade up to the next resistances of 8.33 and 8.44. Above here a realistic target would be 8.73, the 100-week moving average. No trade recs as of this post. A sustained rally in my opinion for wheat would as of now need the Russians to shut the Black Sea pathway down. Domestic demand for US wheat remains nonexistent in my opinion. Fear drives price sometimes and with the heavy fund short, made profit taking amid short covering as easy choice in my opinion with the continued unrest in Eastern Europe.
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