Wheat price forecast: WASDE report points to oversupply concerns

Wheat price has pulled back in the past few days as investors react to the recent dam collapse in Ukraine and the continuing war. Data by TradingView shows that wheat was trading at $624 on Tuesday, equivalent to $6.24 a bushel. This price is about 10% above the lowest level but it remains 53% below the highest point in March 2022.

Wheat and corn prices jumped sharply after an important dam collapsed in Ukraine, one of the biggest exporters in the world. This dam collapse happened a few days after Russia and Ukraine extended a grain export deal.

The dam’s collapse meant that the war will escalate for a longer period. It also meant that the export deal could be disrupted in the coming months. Most importantly, there were concerns that the flooding that ensued could affect the huge agricultural fields.

The wheat price also reacted to the latest WASDE report by the US Department of Agriculture (USDA). This report estimated that the wheat market will be characterised by higher demand and supplies.

Globally, supplies are expected to jump by more than 10.8 million bushels, with most of them coming from Russia, India, EU, and Ukraine. Russia will produce over 3.5 million more bushels this year while India will boost it by about 3.5 million bushels.

While the war in Ukraine is continuing, the country is expected to produce more wheat this year. It will produce over 1 million bushels more, helped by favorable weather.

At the same time, demand is set to jump by more than 4.4 million bushels to over 796 million. This increase will come from China, Russia, and India. Therefore, there will be a supply deficit of about 270 million bushels since global demand will be 1,066 million.

Wheat chart by TradingView

The daily chart shows that wheat has been in a strong bearish trend in the past few months. In this period, it has remained below the 50-day exponential moving average. Despite the recent rebound, it remains below this MA, signaling that sellers are still in control.

The Relative Strength Index (RSI) has moved above the neutral point at 50. Therefore, I believe that wheat prices will resume the downward trend in the coming days and retest the year-to-date low of $567.3. The bearish view will be invalidated if the price manages to clear the 50-day moving average.

Tags: deal, supplies, demand, Ukraine, investors, corn, dam collapse, export, grain, price, WASDE, wheat, Market