Last week, the United States Department of Agriculture (USDA) released the monthly World Agricultural Supply and Demand Estimates (WASDE) report. This is a monthly report made in collaboration with the bureau of statistics entities around the world.
After the report was released, the price of wheat jumped from around $500 per ton to a high of $520. This was a sharp increase for a commodity that had previously been moving in a horizontal pattern. It was also the highest level since October 17.
The reason for the increase was the statement by WASDE that the demand was estimated to increase. The statement raised the demand by 7 million bushels. As the demand is forecasted to increase, the supply is estimated to remain largely unchanged. In this, the global production of wheat was estimated to rise by 2.6 million tons, which was lower by 1.9 million tons because of the Chinese revision. The statement said:
Total 2018/19 global production is raised 2.6 million tons, but is down 1.9 million tons excluding the China revision. Australia’s crop is lowered 1.0 million tons to 17.5 million on continued drought. Morocco, Pakistan, and Ukraine are lowered 0.9, 0.8, and 0.5 million tons, respectively. A 0.9-million-ton production increase for Algeria is partly offsetting. Global exports are lowered 1.6 million tons with almost all of that from Australia reflecting the smaller crop. Australia exports are lowered 1.5 million tons to 11.5 million, the lowest total since 2007/08. Global use is raised 0.2 million tons, but includes a 1.0-million-ton increase for China reflecting higher feed and residual use and larger supplies.
Wheat has reached $517, which is slightly lower than the previous high of $520. After rising to 300, the commodities channel index (CCI) has dropped to 98. At the same time, the Average True Range (ATR) that measures volatility of a security has dropped while the double EMA indicator points to more upward movements. Therefore, the price is likely to continue moving higher and potentially reach the $530 level.