Summary:

  • Grains failed to maintain their gains once again
  • US wheat crop season is forecast to be lackluster
  • Monday’s data had a neutral impact on prices

We’ve experienced a subsequent unsuccessful try to maintain gains on grains which have emerged earlier this year. Those moves have been ushered in by an increase seen in wheat prices. As far as wheat is concerned, one could notice that this is the most oversold grain which could be attributed to forecasts of ample stocks in the current season (2017/2018). The backdrop has been compounded lately by record crops of wheat in Russia.

Taking account of a technical view of wheat prices, we could spot a similar story which already took place in 2015. After a strong rally and a plunge afterward (an inverted V-shape move), there was just a short-lived upward corrective move and then prices resumed their downtrend. As for now, the price is approaching its local lows marked at the beginning of this year. Let us notice that the same scenario was seen in 2015. A potential downside could reach $415c per bushel just above a demand zone in the vicinity of local lows from late 2016 and the first quarter of 2017. Needless to say that the US wheat crop season is still forecast to be awful which could potentially reignite hopes for a rebound as it was in 2015.

link do file download linkSeasonality and the price action are alike in 2017 and 2015. Source: xStation5

Moving on, the yesterday’s data had a mixed to positive impact. There were upbeat prints regarding export inspections for corn in particular which suggest a beginning of a seasonal bounce for maize from abroad. Otherwise, there was a rather neutral tone of the data. Notice that despite adverse weather conditions in the southern US, cotton conditions improved.

link do file download linkExport inspections data has a slightly positive effect tone. Source: Bloomberg

link do file download linkExport inspections as well as weekly export data suggest a possible seasonality-driven rebound, thus the price could find support around current levels. Source: Bloomberg

Corn prices keep sliding and approaching a multiyear support zone around at $310c per bushel. What’s more, fundamental metrics for US corn appear to be favorable which, along with contained output in Brazil and Ukraine, could lift prices in the foreseeable future. At the end of the day, let’s notice that it’s been quite a significant decline in volume, hence higher volume in conjunction with a bullish candlestick on a weekly time frame could be a buying opportunity.

link do file download linkA zone between $315c and $320c per bushel could be seen as the nearest support area preceded by $310c per bushel. Source: xStation5