Move over, corn. There’s another grain that’s quickly finding favor with investors now, though with not as much fanfare: wheat.
Droughts in Ukraine and Spain, torrential downpour in France and more rains in the U.S. Great Plains have combined to slash the global output of wheat, the raw material for making bread, pasta, cookies, flours, industrial starch and alcohol.
Fund Buying Ramps Up In Wheat As Growing Conditions Worsen
Jack Scoville, analyst at Chicago’s Price Futures Group and author of the brokerage’s daily grains report, said funds had ramped up their buying in wheat in recent weeks as uncertain growing conditions around the world continued.
Said Scoville: “Chicago was the upside leader (in funds’ support), implying big speculative buying interest.”
Wheat 300-Min Chart – Powered by TradingView
on the Chicago Board of Trade are up 6% so far for June, heading for their second straight monthly gain, after an abysmal first quarter. The rally in May—18%—was its best in three years.
Year-to-date, CBOT wheat is up 6%.
In contrast, corn futures had their best month in 8 years in May when they rose 21% on delayed plantings from inclement weather. Year-to-date, CBOT corn is up 18%, making it the best-performing agricultural market of 2019.
Wheat Technicals Show It Could Close The Gap With Corn
Still, wheat’s technicals indicate that it could play some more catch up with corn.
Technical analysts have pegged a “Strong Buy” for the front-month July corn contract on CBOT, citing a resistance as high as $5.5162 per bushel. At Thursday’s settlement of $5.344 per bushel, that indicates a further upside of 3% or more.
Wheat’s outlook got another boost on Thursday after crop consultancy Strategie Grains cut by more than 1 million tons its forecast for E.U. soft wheat exports to third countries for the 2019/20 season.
Said the consultancy:
“The outlook here has actually worsened since last month thanks to the new increase for Ukraine’s exportable surplus, given that Ukrainian wheat is a main competitor of E.U. wheat.”
“At current prices, France would export less wheat than in 2018/19 although the northern E.U. countries – Germany, Lithuania, Latvia – would perform solidly, assuming that their harvests rebound in line with current forecasts (dry conditions in the Baltic countries are currently causing concern).”
Various factors have contributed to the deterioration of Europe’s soft wheat crop, including a drought in Spain and more dry and hot conditions through the end of the growth cycle on the eastern side of the E.U. that’s home to Baltic countries such as Poland, Czech Republic, Slovakia.
Above-average rainfall was also beginning to set off alarm bells in Hungary, Italy and, to a lesser extent, Romania, Bulgaria and France, where conditions overall have been good so far this season.
France, the E.U.’s largest wheat exporter, has, meanwhile, experienced above-average rainfall.