Spring wheat futures stuck in downtrend: analyst

Spring wheat futures at the Minneapolis Grain Exchange remain stuck in a well established downtrend and are expected to remain pointed lower barring a weather scare or other outside influence.
“Looking at a chart, it continues to show some weakness,” said Austin Damiani, a broker with Frontier Futures in Minneapolis. The September wheat contract in Minneapolis closed at US$7.5175 per bushel on July 18, the lowest level for the front month wheat contract since June 2012.
In addition to the bearish technical trend, much of the latest selling pressure is tied to expectations for large North American spring wheat production. “So far we’re looking at some pretty good crop conditions across the U.S. and Canada,” said Damiani noting that the weather is looking favourable for the time being with good moisture and no extreme heat.
“We have a big crop coming, and we’re not too far away from harvest,” said Damiani. He added that seasonal price trends typically see spring wheat prices move lower at this time of year.
Damiani said producers were optimistic about yields, but were generally reluctant to sell at current low price levels. The lack of farmer selling was helping slow the downward move in the futures, but “eventually something will have to give.” He said there could be “a pop” in basis levels or the futures if end users need to encourage more farmer selling.
Current demand for the hard spring wheat represented by the Minneapolis futures was described as “routine” by Damiani, with the major world demand currently focused on soft wheat. Egypt and China have both been buying soft wheat recently, while Brazil has been in the market buying hard red winter wheat. With the other wheat classes seeing more demand, the Minneapolis spread over Kansas City and Chicago has narrowed in somewhat. While demand for spring wheat remains to be seen, Damiani expected the international attention would return to spring wheat once new crop supplies become more available.


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