Soft red winter wheat futures at Chicago suffered under a session of profit taking and technical selling after a jump above 500c/bu on Tuesday. 500c continues to look like the level of resistance in the short to mid-term, triggering selling when breached.
The December wheat contract was pretty much oversold and needed the rally it received on the back of corn but with limited supporting fundamentals, both in the USA and globally, needed to push the wheat demand side of the equation, wheat does threaten to become rangebound in the short to mid-term.
Rainfall across the main wheat producing states of Cordoba and Santa Fe in Argentina remains scant. The 14 day precipitation map shows nothing has fallen across these already parched regions and the forecast continues to indicate it will remain very dry.
In the last WASDE report the USDA reduced Argentine wheat production by 500kt to 20.5mt. If there is no reprieve during the spring this estimate is destined to fall further.
China continues to be a mixed bag of information. The drought which reduced wheat production across much of the central Chinese province of Henan by 30%-40% gave way to heavy rain after the wheat had been harvested. This has seen a reduction in production potential due to flooded fields for many summer crops. Those fields that could be drained should finish well though. Officially the summer harvest is a record, that’s the 16th in a row. Strangely though, Xi Jinping has emphasised not to waste food, websites have banned food shows and producers are going against the national narrative and hording grain in some regions. Henan is one such region.