FX.co ★ Wheat Retreats From 8-Week Highs

Wheat futures have dipped below $5.30 per bushel, pulling back from the eight-week highs reached on January 29th. Initial price increases, driven by adverse weather conditions, have given way to renewed concerns over abundant supply and less favorable macroeconomic conditions. The early support from freezing weather across the U.S. Plains and parts of the Black Sea has diminished as weather forecasts have moderated and no significant crop damage has been confirmed, thereby reducing the immediate risk to supply. Concurrently, a rebound in the U.S. dollar from its late-January lows has weakened export competitiveness, and global supply remains plentiful. Elevated U.S. and global inventories are limiting the potential for sustained price increases. Additionally, the high volume of unpriced wheat stored commercially increases the probability of selling during price rallies, therefore restraining potential gains.