Grain futures are growing in price amid bad weather in the US, flood in Argentina and drought in Brazil. Corn prices reached the 10-month high. Soybeans are slightly below the 20-month high. The soy is rising for the 7th consecutive week which is its record rise since 2007. Let’s focus on the wheat which is now falling behind other grains. Will it catch up with soy and corn?
The weekly rating for French wheat rated “good” and “excellent” was cut by FranceAgriMer agricultural agency to 83% on May 23 from 86% on previous week. The weather forecaster Meteo France predicts heavy rains in France this week. Bad weather may further cut the outlook for wheat crops. France ranks 5-6th in global wheat production and 2-3rd by its export. Some market participants believe the bad weather may hurt crops throughout Europe including its Eastern regions. Europe accounts for about 40% of global wheat exports. Note that Russian agencies left out possible weather weakening and raised on Monday the Russian wheat crops outlook to the average 63.5-64mln tonnes from 61-62mln tonnes previously expected. This checked wheat prices. Wheat soared on Friday after Algeria, Bangladesh, Jordan and Morocco announced governmental tenders on grain purchases.
On the daily chart Wheat: D1 is moving sideways since last August. Now wheat is approaching its upper boundary having already surpassed the 200-day MA. The MACD and Parabolic indicators give signals to buy. The RSI is above 50 but below the overbought zone, no divergence. The Bollinger bands® have contracted which means lower volatility. They are titled upwards. The bullish momentum may develop in case the wheat prices surpass the 2nd fractal high and the Bollinger band at 493. This level may serve the point of entry. The most risk-averse traders may stay aside until the wheat breaks through the upper boundary of the rising channel. The initial stop-loss may be placed below the last fractal low and Parabolic signal at 459. Having opened the pending order, we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 459 without reaching the order at 493, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy Buy stop above 493 Stop loss below 459