Looking to the Futures
Wheat Futures Supported by Tighter Yield Outlook
Chicago wheat took off in Thursday’s trading with outlook being a common theme for traders and analysts. Chicago wheat for May delivery, /ZWK26, settled at $5.6675 per bushel, up $0.1825 from previous settlement.
Weather outlook, both in near and long term, is playing a role in Thursday’s wheat move. The National Oceanic Atmospheric Administration (NOAA) released their outlook for 6-10 days through 3-4 weeks in temperature and precipitation. Temperatures are forecasted to be higher than normal through the central US, which is great for outdoor activities but not so much for plants that use snow coverage as insulation from freezing temperatures.
The warmer temperatures mean a possibility of snow melting enough to uncover wheat crops. This could setup the crops to be damaged as the temperature fluctuates between mild and freezing.
Another variable to consider is the lack of snowpack in the Colorado Rockies. The 25/26 winter is ranking one of the lowest in Colorado, USDA has described this year’s winter as 61% of median. This would require record breaking snowfall in the Colorado Rockies to reach normal snowpack. The effects of a low Colorado snowpack can be reaching, as when the snowpack melts, the runoff flows into the US river system through the Colorado, Rio Grande, Arkansas, and Platte rivers.
Without ample rainfall, this would affect drinking water, irrigation, and shipping. The US is not a sizable producer of wheat, averaging ~7% of global production, but a drop in US wheat yields would be globally noticed.
Another outlook was released, this time by USDA with their annual yield outlook, which forecasted lower yields, supplies, and planted area. Projected area planted is 45 million acres down 0.3 million acres from last year. Harvested area is projected lower to 36.6 million acres. Wheat yield is projected to 50.8 bushels/acre, down 5% from last year.
At Schwab, there are 3 contracts to trade wheat, the root symbols are /ZW, /KE, and /MWE.
/ZW is Chicago Soft Red Winter (SRW) wheat. In the US, this product is grown in the Eastern US and Appalachia region. This is the wheat most commonly found in cakes and confections.
/KE is Kansas City Hard Red Winter (HRW) wheat. In the US, this is grown in Great Plains and Pacific Northwest regions. It is the most widely grown wheat in the US and is described as the most versatile, often being used in normal breads, rolls, and pizza crust.
/MWE is Hard Red Spring (HRS) wheat. In the US this is grown in the northern central of the US and is used in more “designer” based wheat foods.
3 other classes of wheat are Durum, Soft White, and Hard White which are all grown in the North Central and Pacific Northwest regions of the US.
Technicals
Chicago wheat for May delivery, /ZWK26, settled at $5.6675 per bushel, up $0.1825 from previous settlement. Friday’s trading opened at $5.725 per bushel.
The 50- and 200-day simple moving averages indicate a weakening bearish trend as the 50-day is below, but approaching, the 200-day. When the 50-day SMA crosses above the 200-day SMA, it changes to a bullish trend, and this event is known as the golden cross. This may indicate a continued rally of the product. This has already occurred under /KE Kansas City HRW wheat.
The 14-day RSI closed at 65.37%, which indicates a bullish trend as it approaches the 70% overbought threshold. As the price continues to approach the overbought threshold, near term resistance may cool off the rally. There is not a divergence between RSI and the current price action.
The directional movement index is solidly indicating a bullish trend. The ADX is high and indicates a strong current trend. The positive directional index is with the ADX which indicates the direction. The negative directional index is low but may rise as the RSI is crossed.
Specifications
Economic Calendar
- Chain Deflator – Advance - 8:30 AM ET
- GDP – Advance - 8:30 AM ET
- PCE Prices - 8:30 AM ET
- Personal Income - 8:30 AM ET
- Personal Spending - 8:30 AM ET
- S&P Global US Manufacturing PMI – Preliminary - 9:45 AM ET
- S&P Global US Services PMI – Preliminary - 9:45 AM ET
- New Home Sales - 10:00 AM ET
- University of Michigan Consumer Sentiment – Final - 10:00 AM ET
New Products
New futures products are available to trade with a futures-approved account on all thinkorswim platforms:
- Ripple (/XRP)
- Micro Ripple (/MXP)
- 100 OZ Silver (/SIC)
- 1 OZ Gold (/1OZ)
- Solana (/SOL)
- Micro Solana (/MSL)
Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.