Wheat price moved sideways this week after the WASDE report raised questions about demand in 2024. According to TradingView, wheat was trading at $580, where it has been in the past few months. This price is much lower than last year’s high of $765.
Wheat supply and demand dynamicsThere are two main reasons why wheat price has remained under substantial pressure recently. First, we are living in an era of abundant wheat supplies as Russia and Ukraine boost supplies. Russia, the biggest wheat exporter in the world, had a record crop last year while Ukraine increased production even as the war continued.
Russia and Ukraine have continued to sell their wheat stocks internationally even after the former abandoned the Red Sea deal in 2023.
Meanwhile, there are signs that wheat demand is not growing as fast. According to the latest USDA report, wheat food use in the US will drop by 10 million bushels to 960 million.
The report also noted that global dynamics are for increased supplies, which will get to over 1.05 billion bushels while global consumption will be 797 million bushels. This means that the supply surplus will continue, putting prices under pressure,
Countries like Argentina, Ukraine, Australia, and Turkey are expected to produce more wheat this year than they did in 2023. The biggest risk for wheat and other crops is weather, with estimates showing that dry conditions will continue in Europe this year.
The other risk, which could be a good thing in terms of price, is that farmers may reduce their acreage this year because of the weak prices. This is a common situation in the agriculture industry where low prices push people away from an area, which boosts prices. When the price rises, many farmers move back to planting, which pushes prices lower.
Wheat price forecast
Conducting a technical analysis can help us predict the next price action for wheat. In the daily chart above, we see that it has been in a consolidation phase in the past few weeks. Along the way, wheat has formed a symmetrical triangle pattern, which is a popular pattern.
Wheat’s volatility has dropped as evidenced by the Average True Range (ATR), which has moved downwards recently. It is also hovering at the 50-day and 25-day moving averages. Therefore, I suspect that the price of wheat will have a bearish breakout in the coming weeks. If this happens, the next point to watch will be at $520, the lowest point in December.
The alternative scenario is where the price makes a bullish breakout and reaches a high of $620, the highest point in December.
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