Will The Russians Make It Another Banner Year For Wheat?

Wheat futures on the Chicago Mercantile Exchange are up nearly 5 percent month-to-date, not far from the almost 6 percent gain seen in January 2018. While inclement weather is behind of some of the tightness in the current winter crop, analysts point to the Russian bid to control supplies as another increasingly influential factor.

Moscow may have a higher profile in the oil market these days for its collaboration with OPEC on production cuts. But Jack Scoville, vice president at Chicago’s Price Futures Group and author of its daily grains report, said his intelligence showed Russia was probably trying just as hard to curtail its wheat exports. Said Scoville:

“The Russian government is working to limit wheat exports to about 18 million tons through the end of June. It might stop some exporters from selling wheat into the world market.”

He said exporters were reported to be having trouble sourcing wheat as any supply near ports had apparently been sold, with the only grain in storage being in the interior. Added Scoville:

“Ukraine is also having trouble sourcing wheat for export, and the EU has been exporting less as Russia remains the largest wheat exporter in the world.”

Shawn Hackett of Hackett Financial Advisors in Boca Raton, Florida, said capital flows into wheat have been very strong since the start of January, reaching levels last seen in early 2018, and providing optimism for higher prices as February approached.

Hackett adds:

“As we enter the next cold phase of winter season in the Northern Hemisphere, multiple repeated winter kill threats are likely to be seen over the next three months, offering upside price volatility expansion.”

“This will be happening at a time of strong U.S. exports of high-quality wheat due to last year’s poor international crops, especially in Russia.”

Hackett said Kansas Hard Red Winter Wheat , the bread-making variant of the grain which settled at $5.15 per bushel on the spot March contract on Wednesday, was well supported at $4.82. “End-users would be wise to buy any breaks, should they occur, into this support zone,” he added.

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Scoville said CME Soft Red Winter Wheat , used for making flour as well as industrial products such as adhesives and starches, was cheaper than most competition at $5.26 per bushel. He added:

“World crop reports continue to indicate less production and tightening supplies. Australian and European prices have also been relatively strong. U.S. FOB prices for wheat are at or below just about all of the competition. SRW wheat is still the world’s cheapest wheat.”

Dan Hueber, author of the Hueber Report on grains from St. Charles, Illinois, concurred, saying:

"The CME wheat market is holding ground as well as any market right now with March futures continuing to flirt around resistance here at 5.24.”

“Daily stochastics have maintained a positive bias and there remains a possibility that we could make a run back to the 5.40/5.45 zone.”

But if there’s anything making a bet on wheat—or for that matter, any grain—difficult now, it’s the absence of crop data from the U.S. Department of Agriculture due to the government shutdown, Scoville said in a news report published this week. He added:

“You never know what tweet’s going to come out next and screw up what had been a wonderfully profitable position or at least not a horrid position. You can get hammered in half a tweet.”

There’s “no export news at all, no demand news at all, except for the weekly export inspections report, which is well after the fact. We’re searching for news, you’ve got to work hard these days.”

Written By: Investing.com