CNS Canada –– All three U.S. wheat futures markets hit fresh contract lows on Tuesday — and further losses are likely, as most fundamental and technical factors remain bearish.
“The trend certainly hasn’t been positive,” said market analyst Bryan Strommen of Progressive Ag in Fargo, N.D. He cited improving U.S. winter wheat conditions, favourable weather forecasts, the fast spring wheat planting pace, cheap foreign competition, and talk that Russia will soon end its wheat export tax, as some of the bearish influences overhanging the wheat market.
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Chart signals are also pointing down, as speculators add to their large short positions, he added.
Wheat futures were “trying to find a bottom,” he said, but added that the bottom could be another 20 cents or more lower in Minneapolis spring wheat.
The Minneapolis July spring wheat contract settled Tuesday at US5.2475 per bushel, which represents a five-year low on the monthly charts.
That large fund short position does have the potential to fuel a correction higher, if something comes forward to provide the catalyst for a short-covering bounce, said Strommen.
Issues with the U.S. winter wheat crop could be somewhat supportive, as early reports from a crop tour of Kansas going on this week are “all over the board,” said Strommen.
Dryness in the U.S. northern Plains could also become a concern for the spring wheat market, if there are not timely rains later in the growing season.
“We’re a long way from the combine,” said Strommen, adding that it will become more of a weather market moving forward. “If we don’t have any issues and have a good crop, we’ll have a challenge ahead of us to get it sold and create some demand around the world.”
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
