Price action: July SRW futures fell 11 cents to $6.16 3/4, ending the day near the session low. July HRW futures lead the complex lower, falling 32 1/4 cents to $7.88, near the session low., while July spring wheat fell 22 1/2 cents to $7.94.
Fundamental analysis: Wheat futures fell sharply on technical selling and harvest pressure. USDA is releasing production estimates Friday, with the trade expecting winter wheat production to rise compared to a month ago. Wheat conditions have improved remarkably since the initial report a few months ago. The better conditions have pointed to USDA raising production estimates in the past and this year we feel that will continue. The expectation of strengthening production paired with reduced demand, mentioned below, is also likely pressuring wheat prices at this juncture.
Soil moisture has greatly improved for HRW acres although some areas have recently become too wet, according to World Weather Inc. Production areas are expected to receive rain starting Friday and into next week, beneficial for some but bringing wheat quality concerns into a few areas where the rain is greatest. Rain is expected to tail off into the second week of the outlook, the forecaster says.
USDA releases export sales tomorrow morning, with analysts expecting a net reduction of 150,000 MT to net sales of 50,000 MT for the 2022-23 marketing year and net sales between 200,000 and 550,000 MT for the 2023-24 marketing year. The current data leads us to believe that USDA will adjust expected exports lower in Friday’s WASDE as exports have not met the required pace to meet their current estimate of 775,000 bushels.
Technical analysis: July SRW futures fell under pressure, although HRW futures led the complex lower today. SRW futures remain incapable of getting a bid above the 40-day moving average, currently at $6.39 1/2, which has capped all the upside since mid-February. Price remains in a downtrend stemming from the February, March, April, May, and now June highs. A break of this trendline will give bulls confidence that a low could be in place, but until then bears remain in firm control of the technical advantage. Resistance stands at the 20-day moving average at $6.21 3/4, backed by today’s high of $6.35 1/2, quickly reinforced by $6.39 1/2. Price settled near the 10-day moving average at $6.16 1/4, which will remain an important pivot into the latter half of the week. Bears want to extend today’s weakness into stiff $6.00 support, backed by the recent move-low at $5.73 1/4.
July HRW futures succumbed to stiff selling pressure today, breaking below moving average support and closing in on last week’s low. Bears are targeting the May 31 low at $7.63 3/4 with additional support at $7.83 on the way. Price is nearing the lower end of the range that has controlled price action for the past 11 months. Bulls are targeting resistance at $8.13, backed by yesterday’s high at $8.47 1/4. Price remains volatile, evidenced by the 60-cent range in the last two days.
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