Wheat futures were the leader in Tuesday’s trade. Can the rally continue?

Wheat

Tuesday’s Recap
July Wheat futures settled at a one week high of 546’0 Tuesday, adding 17’0 (3.21%). Across all maturities, 142,508 contracts were traded, with 86,585 done in the July maturity. Overall open interest fell 3,843 (0.80%) to 478,037. July fell by 3,891, or 1.47%, finishing at 260,416.

Technicals
Fundamental and technical momentum has done a 180 since the reversal on May 13th. Since then there have been growing concerns over wheat crops in Russia and China which has added a tailwind to prices. Volume was decent yesterday with a decline in open interest, suggesting a fair amount of short covering took place. Prices are right at our first resistance pocket this morning, we’ve outlined that as 548 1/4-550 3/4. To fuel hopes of a bigger relief rally, the Bulls need to see consecutive closes above here. The next upside objective would come in from 569 1/4-571.

Technical Levels of Importance
Resistance: 548 1/4-550 3/4***, 569 1/4-571***
Pivot: 532 1/2-535
Support: 517 1/2-523 1/4***, 498-501 1/4***

Headlines

Russian Wheat Concerns

High temperatures and a lack of rain over the coming months are expected to deplete the harvest in Russia’s largest grain region Rostov, the head of the local grain lobby group said after a farming emergency was declared.

Rostov Governor Yuri Slyusar issued a decree on May 19 introducing the state of emergency for farming after spring frosts and ordered local authorities to evaluate the damage.

Concerns Grow Over China’s Wheat Crop

Traders were monitoring possible crop damage in China after temperatures in the wheat-producing region of Henan reached 40 degrees Celsius (104 degrees Fahrenheit) on Tuesday, adding to weather stress after recent drought.

“It’s not new, the lack of rain in winter wheat zones in China, but the spike in temperatures is making things worse,” one futures dealer said.

European Wheat

There has also been background concern about low rainfall this spring in northern Europe, though showers forecast this week were expected to ease the strain on crops. “Rain is urgently needed in north Germany, Denmark, south Sweden and Poland, but this is forecast to arrive from Thursday, continuing into Monday,” one German trader said.

Popular Options
Option volumes were largest for the July 600 call (4,797) and the July 500 put (2,272). Calls with the largest open interest are the July 550 strike (15,733), and for the puts are the July 550 strike (9,263).

Volatility Update
Implied Volatility ended the day moderately up with WVL adding 1.2, to close the session at a one week high of 28.65. The 30-day historical volatility settled up 1.94% to a one month high of 23.03%. The WVL Skew settled sharply down, dropping by 0.46 to end the session at a twelve year low of 3.76.

Seasonal Tendencies Update
(Updated on 5.19.25)

Below is a look at historical price averages for July wheat futures on a 5, 10, 15, 20, and 30 year time frames (Past performance is not necessarily indicative of future results).

Commitment of Traders Update
Friday’s Commitment of Traders report showed Funds were net sellers of roughly 13k futures/options. This expands their net short position to 126,895. This nearly ties the May 2023 net short position. This would make it one of the largest net short positions since the end of 2017 and start of 2018.