Wheat price forecast: no end in sight for this bear trend

on May 22, 2023
  • Wheat price has crashed to the lowest level in two years.
  • Russia reached a UN-brokered deal on agriculture supplies last week.
  • The deal will see Ukraine ship its wheat through the Black Sea.

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Wheat prices continued slipping on Monday as investors reacted to the recent grain deal extension. The price crashed to a low of $591, the lowest level in two years. This means that wheat prices has crashed by over 55% from the highest point in 2022.

Russia grain deal extension

Russia and Ukraine are two of the most important players in wheat and other agricultural products in the world. Russia produces and exports the most wheat in the world, making it a crucial part in the world economy.

The most important wheat and corn news was the decision by Russia to allow Ukrainian wheat to move to the international markets through the Black Sea. This happened after the UN helped to broker the deal.

Therefore, the price has crashed because of the abundant wheat supplies compared to demand. Analysts note that wheat inventories in Russia remains at their highest level in years. As I wrote in this article, this is important since Russia is expected to move to the harvest season in July.

Still, in the long term, there is a likelihood that wheat prices will bounce back. For one, output in Ukraine is expected to remain sharply lower for a while. The USDA believes that the country’s wheat production will be at 16.5 million tons in the 2023-2024 season. It will export 10 million tons. The two figures were 20.9 million and 15 million, respectively in 2022 to 2023.

Russia is also expected to have a smaller output this year. The USDA expects that wheat production in the country will drop by 11% from its record high in 2022. Further, there are still worries that Australia will go through El Nino, which will see exports fall by a third. The only bright spot is Argentina, where output is expected to jump by 45%.

Wheat price forecast

Wheat price

Wheat chart by TradingView

The daily chart shows that wheat prices have been in a strong bearish trend in the past few months. It managed to move below the important support level at $720, the lowest level in January this year. Wheat is also stuck below all moving averages while the Stochastic Oscillator has moved below the oversold level.

It has also crossed the important support at $596, the lowest level on May 4. Therefore, there is a possibility that the price will continue falling as sellers target the key support at $500. In the long term, spot and futures will bounce back.


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