Medium term
Trade view / 02 June 2016 at 22:51 GMT

Wet weather is working wonders for the wheat price outlook

Managing Partner / Spotlight Group
United Kingdom
Instrument: ZWN6
Price target:
Market price:

On a broad base, grain futures prices are booking solid gains amid bad weather in the US, floods in Argentina and drought in Brazil. I looked at corn yesterday, but in response to a client request here is my thoughts on wheat.

The weather in the Americas has been well documented, but do not overlook the heavy rains that have been affecting continental Europe. The weekly rating score for French wheat rated “good” and “excellent” was cut by the “FranceAgriMer” agricultural agency to 83% on May 23 from 86% on previous week. It will only get worse as weather forecaster Meteo France predicts heavy rains in France will continue and so further hurt the outlook for wheat crops.

France ranks sixth in global wheat production and third for global exports. The broader European outlook is not looking good as heavy rainfall is starting to impact Eastern Europe as well. Europe accounts for about 40% of global wheat exports.

 Source: Spotlight Ideas                                                                                                           
The daily chart above shows that wheat prices have become stuck, and rotating in a sideways channel since last August. However,a  now spot price is ahead of the 50 and 200 day moving averages and at a deeper technical level, the MACD and parabolic indicators at all time levels call for a BUY or STRONG BUY. 

The outlook is encouraging, as prices can stay strong into early 2017, with prices heading to US Cents 524/Bushel expected by Q1 next year.

Source: Spotlight Ideas

Management and risk


Wheat July 16 ZWN6, in US Cents/Bushel

Entry: Buy 485.50 at 1914 BST (1814 GMT)

Targets: 493.83 … 508.73 … 518.50 … 528.27

Stop: 440.00

Time horizon: Medium term

— Edited by Robert Ryan

Non-independent investment research disclaimer applies. Read more
Futuretick Futuretick
first target is hit, as wheat and, most commodities rallied hard while DX crashed after the 38k job number shock!
AGM - Spain AGM - Spain
Hi Stephen. I bought some CFDs of WHEATSEPT16 at 490$ some weeks ago (before brexit). The current value is 446$, close to your recommended stop (440$). Do you still consider that the price could increase at short/medium term?. Thanks in advance. Antonio.
Stephen Pope Stephen Pope
Dear AGM,

Thank you for your question. Firstly let me just clarify my position...I went long of the July Contract in Wheat (ZWN6) on June 2nd at 485.50 and took profit at 517.74 on June 9th.

Now for your question... The time based technicals out to the daily measure are either neutral or buy...then from daily to monthly sell or strong sell takes charge.

Canadian wheat acres came in just lower than expected, however, conditions in Canada are reported to be good. Latest acreage estimate from Statistics Canada has crop sowings down 3.9%, to 23.2m acres, expectations were 23.4m acres. Sowings are ahead of 2015 levels; moisture levels were good in most areas this spring.

On top of this the Australian Ministry of Agriculture said wheat prices are set to fall to 15-year lows in 2016-17. The world wheat indicator price is forecast to average lower in 2016–17, the Ministry expects that supply will once again outstrip demand. I will prepare a new wheat note for you,
Stephen Pope Stephen Pope
Dear AGM.

FYI I have just submitted a new trade post on wheat.
AGM - Spain AGM - Spain
Thank you very much Stephen. I am afraid that my long position is not the good one at this moment. I would have to assume the related losses. Best regards. Antonio.


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