Wheat Slipping Back Leading into USDA Data Release

Wheat futures advanced across all exchanges Thursday, with CBT soft red wheat gaining 6-8 cents, KC HRW up 1-3 cents, and MPLS spring wheat rising 2-3 cents, alongside increased open interest. This occurred despite weak weekly export sales of 305,351 MT, marking the second-lowest total for the marketing year. Traders are looking ahead to Friday's USDA WASDE report, expecting minimal changes to the 2025/26 balance sheet, with stocks projected at 865 mbu, while Expana increased its EU wheat production estimate by 3.3 MT to 136.1 MMT.

Analysis

Wheat futures exhibited broad-based gains on Thursday, with CBT contracts advancing by 6 to 8 cents, supported by a significant increase in open interest of 7,568 contracts. This suggests new capital inflows are underpinning the price rally. However, this technical strength contrasts sharply with weak underlying fundamentals. Weekly Export Sales registered a near-low for the marketing year at 305,351 metric tons, indicating frail overseas demand. Concurrently, a potential supply-side headwind is developing as Expana raised its EU wheat production forecast by 3.3 MMT to 136.1 MMT. All eyes are now on the upcoming USDA WASDE report, where traders anticipate a minor 4 million bushel decline in U.S. ending stocks to 865 million bushels for the 2025/26 season, a factor that could provide modest support if realized, though production estimates will remain static until the end-of-month Small Grains report.

Key Decisions for Investors

• Investors should recognize the current divergence between positive price momentum, reflected in rising futures and open interest, and the bearish fundamental backdrop of poor export sales and higher EU production estimates.
• The upcoming WASDE report is a key catalyst; any significant deviation from the consensus expectation for a slight reduction in ending stocks could introduce price volatility, making it a critical data point to monitor.
• Given the conflicting signals, it may be prudent to treat the current rally as technically driven and exercise caution on new long positions until demand indicators, such as future export sales, show signs of improvement.