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This is a follow up article to: Wheat rises for the fifth consecutive day due to European production issues
Wheat (Symbol: Wheat-C) and soybean (Symbol: Soybean-C) prices saw slight pullbacks after a speculative-driven short-covering rally lifted prices off their recent lows. Despite this breather, both contracts hovered near multi-week highs, with supply concerns continuing to drive market sentiment.
Picture: Wheat and soybean prices after a short-covering rally, as observed on the VT Markets app.
Wheat prices fell to $5.77 a bushel, but the contract is still up about 10% from the start of last week. Poor wheat production in Europe, exacerbated by drought, has tightened global supply and supported wheat prices in recent weeks. These supply concerns have shifted the market’s focus toward potential disruptions in the near term.
Soybean prices also fell to $10.16-3/4 a bushel as weather conditions in the U.S. Midwest have stressed approximately 25% of the soybean crop. However, late rains provided some relief to growing areas, leading to the recent pullback in prices.
Soybean market participants are still digesting updated forecasts, which point to a robust U.S. harvest season. StoneX recently raised its U.S. soybean production estimate to 4.575 billion bushels, further adding to supply expectations. Even with short-term weather concerns, a strong harvest may prevent prices from rising further in the near term.
The recent price increases in wheat and soybean were driven largely by short-covering activity among speculators. As short positions were being closed, it added upward pressure to both commodities.
Traders should remain cautious as the weather and speculative activities continue to dominate movements in the soft commodities market. For wheat, Europe’s production challenges will likely support prices in the near term, while in soybeans, attention remains focused on U.S. weather conditions and potential export complications due to low water levels in the Mississippi River. Traders should stay attuned to weather forecasts in the U.S. Midwest, as any renewed dry spells could further stress the soybean crop. In addition, potential logistical challenges during the U.S. harvest season may create further price volatility in both commodities.
