Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Wheat: Latest Darling Of Commodity Bulls As Record Highs Beckon On India Ban

By Investing.com (Barani Krishnan/Investing.com)CommoditiesMay 17, 2022 03:52AM ET
www.investing.com/analysis/wheat-latest-darling-of-commodity-bulls-as-record-highs-beckon-on-india-ban-200624365
Wheat: Latest Darling Of Commodity Bulls As Record Highs Beckon On India Ban
By Investing.com (Barani Krishnan/Investing.com)   |  May 17, 2022 03:52AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Commodity bulls vexed at times by oil's volatility may have a friendlier one-way trade now that’s likely to last for a while: wheat. 

The grain, which rose by its daily limit in Chicago trading on Monday—in response to the export ban announced by India on Friday to most countries—looks likely to hit record highs above $13 a bushel soon, based both on the fundamentals of supply-demand and chart action.

And wheat’s upside could last a while, with prices seen sticky in the upper $12 range, leading up to over $15, according to technicals. 

Wheat Daily
Wheat Daily

All charts courtesy of skcharting.com

US wheat futures already hit record highs of $13.40 a bushel on Mar. 4, after the Feb. 24 invasion of Ukraine by Russia upended the global market for the grain. Prior to that, Russia and Ukraine used to jointly supply nearly 30% of the world's wheat from vast and fertile farmlands in the Black Sea region known as the “breadbasket of the world.”

Despite the supply deficit, Chicago wheat fell below $10 a bushel by Apr. 4—exactly a month after its record high—on signs of some relief in shipments from the Black Sea despite the Ukraine war.

India’s ban put the market on a different trajectory. The embargo was announced as heatwaves decimated the wheat crop in the world’s second-largest grower, which produced 107.59 million tonnes in 2020. That’s individually more than the 85.9 million tonnes produced by Russia and the 24.9 million tonnes produced by Ukraine that year, although the two “breadbasket” nations cumulatively commanded 110.8 million tonnes of world supply, versus the 134.25 million tonnes from China. 

India targeted to export a record 10 million tons of wheat in 2022-23 after importing nations looked to New Delhi to fill in the gap following Russia's war on Ukraine. But as record-shattering heatwaves sent temperatures above 50°C (122°F), damaging wheat yields across India, the government was forced to reconsider its position.  

India’s Directorate General of Foreign Trade, however, made a concession on Monday—that exports would still be allowed for countries that require wheat for food security. All other new shipments would be banned, it said.  

“The new ban puts an additional strain on the world export market, considering that India was expected to be an alternative to Russia and Ukraine amid the ongoing war there,” said Jack Scoville, chief crop analyst at the Price Futures Group in Chicago. 

In Monday’s session, soft red winter wheat futures on the Chicago Board of Trade hit the daily 70-cent trading limit cap to settle at $12.47. The trading limit will go up by 35 cents, to $1.05 from Tuesday onwards, the CME Group, which runs the Chicago exchange, said. 

Year-to-date, Chicago wheat is up 62%, turning everything made from the produce, including bread, cakes, and noodles, costlier as US inflation runs at 40-year highs.

Wheat Weekly
Wheat Weekly

Charts indicate that $15.50 could be an extended high for Chicago wheat, said Sunil Kumar Dixit, chief technical strategist at skcharting.com. 

“Strength above $12 can ease the advance into $12.80 and retest the $13.40 record high,” Dixit said.

“A base building above the $13.00 - $13.40 supply zone can put wheat futures on a higher target range of $14.50 - $15.50 over an extended period of time.”

“Overall broader outlook is very bullish and we see a strong case for a new high in a few weeks,” he adds. 

Wheat Monthly
Wheat Monthly

Yet, for any reason the market retreats below $11, a precipitous drop could follow, Dixit warns.

“Projections come with a caveat that breaking below $11.00 can put wheat prices at the risk of the 50-Day Exponential Moving Average of $10.75, and the 100-Day Simple Moving Average of $9.65,” he said.

To avoid a break in the uptrend, Dixit said wheat prices need to stay firmly above $12. 

“Weakness below $12 can push wheat down to $11.50, while breaking below $11 will raise the red flag for the invalidation of the current bullish breakout.”

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

 
Wheat: Latest Darling Of Commodity Bulls As Record Highs Beckon On India Ban
 

Related Articles

Wheat: Latest Darling Of Commodity Bulls As Record Highs Beckon On India Ban

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
SunilKumar Dixit
SunilKumarDixit May 17, 2022 7:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
As expected, prices dropped off the high, filled the gap at 1200
Barani Krishnan
Barani Krishnan May 17, 2022 7:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, the alternative scenario that you penciled in. But we need to see under $12, otherwise the upside holds, going by your charts.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email