Wheat Falling to Start Wednesday

Wheat futures are showing losses across all three exchanges on Wednesday morning, failing to sustain recent gains despite mixed trading on Tuesday. This market movement precedes the anticipated USDA WASDE report on Friday, where analysts forecast an increase in US wheat stocks to 867 million bushels. Concurrently, EU soft wheat exports total 8.38 MMT, French production is estimated at 33.3 MMT, and recent tenders from Algeria and South Korea indicate ongoing international demand.

Analysis

Wheat futures are experiencing broad losses across all three major exchanges on Wednesday morning, failing to hold recent gains despite mixed trading activity on Tuesday. This current downturn reflects a moderately negative market sentiment, with CBOT and KCBT contracts down 6.5 to 8 cents. The "Goldman roll" activity saw a significant decrease in December open interest by 20,504 contracts, while March open interest increased by 12,359 contracts.

A key near-term catalyst is the anticipated USDA WASDE report this Friday, which analysts expect to show an increase in US wheat stocks to 867 million bushels, up 23 million bushels from September. This projected increase in supply, alongside a slightly higher French soft wheat production forecast of 33.3 MMT, contributes to the current bearish tone. These supply-side expectations are likely weighing on futures prices.

Despite the current price weakness, international demand for wheat remains evident, with Algeria purchasing an estimated 150,000 to 170,000 MT and a South Korean importer securing 75,000 MT. However, preliminary open interest declined in both CBT and KC HRW futures, suggesting some position unwinding. EU soft wheat exports have maintained relative stability, down only 0.33 MMT year-over-year to 8.38 MMT.

Key Decisions for Investors

• Investors should closely monitor the USDA WASDE report on Friday for confirmation of increased US wheat stock forecasts, which could further pressure prices.
• Consider the balance between anticipated higher supply, indicated by the 867 mbu US stock forecast, and persistent international demand from tenders in Algeria and South Korea.
• Evaluate current positions given the broad market losses and declining open interest in key contracts, which may signal a lack of bullish conviction.