CNS Canada –– U.S. wheat futures may have corrected off of nearby lows, but the nearby path of least resistance remains pointed lower, according to a market analyst.
“In the big picture, we have plenty of supplies and demand has been lacklustre,” said Randy Martinson of Progressive Ag at Fargo, N.D. With export demand eroding, he expected wheat would need to see some fresh fundamental news or eventually follow corn and soybeans lower.
Kansas City hard red winter wheat futures are at the weakest levels of the three U.S. wheat markets, with improving weather conditions in the Southern Plains behind some of the extra bearishness there.
There’s no real risk to planting winter wheat in the southern Plains, Martinson noted, as even if it fails, producers can collect crop insurance and plant something else in the spring instead.
Outside factors, including weather issues in Australia and the Black Sea region, have provided some support for U.S. futures in recent days, but Martinson said the concerns were overblown, at least for now.
From a chart standpoint, Martinson placed nearby support in the Chicago December soft wheat contract at $4.80 per bushel (all figures US$). If that fails, he placed the next support at the contract low, around $4.63 per bushel.
The December spring wheat contract in Minneapolis is trading just above support at $5 per bushel. He was the least bearish on the Minneapolis futures and said they were most likely to see a move higher, with an upside target of $5.50 per bushel likely before the December contract goes off the board.
The need for quality wheat in some parts of the world, especially India, should help the spring wheat market, according to Martinson.
“Quality will bring some demand to the spring wheat area, but there is plenty of wheat in the world and until we see something change the market will be sluggish.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.