Wheat futures dropped to a 10-week low on speculation that there will be a robust crop due to beneficial weather in the Northern Hemisphere. According to Commodity Weather Group LLC, nearly 100 percent of the winter-wheat crop in the US Great Plains will receive rain within the next few days which will offset crop damage from drought in other areas.
Beneficial weather is also seen aiding crops around the world, such as crops throughout Europe and Ukraine. More arid climates in Canada helped planting crops. Canadian stockpiles are expected to double to the highest level in two decades.
Due to the increased precipitation, the United States forecasted global wheat stockpiles to increase to a three-year high. Jim Gerlach, president of A/C Trading Co., said “the market is still adjusting to the rising inventory outlook.” And wheat futures could see further declines.
Since hitting a 14-month high on May 6, wheat has declined 12 percent in less than three weeks.
Price action closed below support at $652.89 and at the bottom of the range. The 20 EMA is looking to converge with the 50 EMA for a bearish crossover, which will support further negative price action. However, a small pullback to the 200 EMA is warranted given the size of the correction. Nevertheless, look for wheat to trade lower to $639.90 at secondary support.