Russian wheat remains the cheapest in the world, analyst says

Russian wheat was the lowest offer in the Egyptian tender, and this helped spark more selling in wheat futures overnight. May Chicago wheat closed sharply lower yesterday with an outside-day down, which was a bearish technical development.

More talk of stiff competition from the Black Sea region and a higher trade in the U.S. dollar helped to pressure prices. Traders await developments on whether Ukrainian exports will continue to flow freely.

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They are also anticipating the first look at U.S. 2023/2024 all wheat plantings and production expectations from USDA's Outlook Forum, as well as any updates on the weather pattern for early March, when the U.S. winter wheat crop emerges from dormancy.

A Bloomberg survey showed an average trade expectation for U.S. planted area at 48.5 million acres, with a range of expectations from 46 to 50 million. This would be up from 45.7 million last year.

Production is expected to come in near 1.882 billion bushels (range 1.696-1.995 billion) versus 1.650 billion bushels in 2022/2023. Ending stocks are expected to be around 646 million bushels (range 544-780 million) versus 568 million bushels in 2022/2023.

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A bumper Russian harvest has been keeping a lid on wheat prices, with U.S. prices well above Russian prices. The Russian dominance also exposes the vulnerability of the world's food supply chains.

Russia's total 2022/2023 wheat crop is expected to top 100 million metric tons (a record), according to researcher SovEcon. For the coming season, production is projected at 86 million metric tons. Ending stocks for 2022/2023 are expected to be the highest since 2009/2010, according to USDA figures.

The Indian government asked state-run Food Corp. to sell another two million metric tons of wheat in the open market to cushion consumers from rising grain and flour prices.

U.S. wheat export inspections for the week ending Feb. 16 came in at 373,429 metric tons, which was within the range of expectations of 300,000-525,000 metric tons. Cumulative inspections for 2022/2023 have reached 14,659,515 metric tons, which is 2.8% below last year. Inspections have reached 69.5% of USDA's forecast for the marketing year versus a five-year average of 67.9%.

MARKET IDEAS: May Chicago wheat resistance is at $7.63 ¹⁄₂ and $7.77, with $7.53 ³⁄₄ as support. If support gives way, the market will look poised for a test of the January lows at $7.20 ³⁄₄ .

About the Author: Terry Roggensack, a founding principal of The Hightower Report, analyzes the livestock, grain and soft markets. Roggensack has over 30 years of experience in the commodity and financial futures industry. In the late 1980s, he briefly lived in London as acting director of a new London clearing firm. Prior to that, Roggensack was director of research at Stotler & Company.

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