Wheat prices continued dropping even as Russia warned that it could rescind the grain exports deal. The price has dropped in the past four straight days and is trading at $660, which is slightly above the year-to-date low of $647. It has dropped by more than 51% from the highest point in 2022.
Russia grain deal threat
One of the top commodity news was that Russia was considering terminating the grain export deal if the G7 moves on with more trade curbs from his country.
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In a statement, Dmitry Medvedev said that the country will exit the safe-transit deal that makes it possible for Ukrainian grains to be shipped from Black Sea ports. He also warned that Russia would curb exports of its own wheat products if the G7 sanctions continue.
The announcement is important because Ukraine is one of the biggest players in the wheat market. Data shows that it is the sixth biggest exporter of wheat after Russia, European Union, Australia, Canada, and the United States.
The reports came a few days after the US Agricultural Department published its WASDE report. In it, the USDA said that there will be higher supplies of wheat this year coupled with higher consumption. It raised supplies by 0.7 million tons because of higher production in Ethiopia.
Demand for wheat remains significantly higher because of China and India. China’s wheat exports are expected to jump by 2 million bushels to 12 million, the biggest increase since 1995. The report added that:
“China’s imports are raised on strong imports to date, particularly from Australia; China is now the leading 2022/23 global wheat importer. Projected 2022/23 world ending stocks are lowered 2.1 million tons to 265.1 million, the lowest since 2015/16.”
The biggest challenge for wheat prices is that more traders are leaving Russia. Viterra and Cargill, have announced plans to leave, which will make the price discovery challenging.
Wheat price forecast
Wheat chart by TradingView
Wheat prices have been in a strong bearish trend in the past few months. It has dropped below the key support at $723, the lowest point in August last year. It also formed a break and retest pattern by retesting this resistance level.
Wheat has remained below the 25-day and 50-day exponential moving averages while the Relative Strength Index (RSI) has pointed downwards. Therefore, wheat will likely continue falling as sellers target the next key support level at $600. A move above the key resistance point at $700 will invalidate the bearish view.
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