Hard Red Winter Wheat: Will Bread Be Affordable Next Year?

Photo by Evi Radauscher on Unsplash

Hard Red Winter Wheat is one of the grain commodities, along with soft red wheat, corn, soybeans and others. Within the wheat family, first of all, there is a fundamental difference between two wheat types. Soft wheat is low in protein and is basically used in cakes in pastries. By contrast, hard wheat has a higher content of protein and it founds itself in breads and hard baked goods. Some time ago, trading of hard wheat took place at Kansas City Board of Trade. Then, it moved to Chicago. One can trade hard wheat futures at Chicago Board of Trade under the ticker $KE. Hereby, the contract size is 5’000 bushels (300’000 pounds) each and the prices are in Dollars US per 100 bushel.

In December 2020, we held a bullish view. As a matter of fact, the prices climbed from 524 USD in December 2020 towards 738 USD by August 2021. Now, we expect a short term pullback. Then, a rally towards 1000 USD and higher should take place.

Hard Red Winter Wheat Weekly Elliott Wave Analysis 09.19.2021

The weekly chart below shows the Hard Winter Wheat front contract IH #F. From the all-time lows, the prices have developed a cycle higher in black wave ((a)) of a grand super cycle degree. It has ended in March 2018 at 1148 Dollars. From the highs, a correction lower in wave ((b)) has unfolded as an Elliott Wave double three pattern. In 8 years, as a matter of fact, IH #F has lost 3/4 of the price reaching 296 Dollars per 100 bushel. It is the preferred view that an important bottom on October 2016 has been set and the black wave ((b)) has ended.

From the lows, consequently, a new rally within wave ((c)) may have started. Hereby, the super cycle degree waves (I) and (II) have already ended, while above 365, wave (III) is extending higher. It has reached the 625-785 target area. However, the RSI reading still shows a divergence as related to the wave (I). As a consequence, acceleration within wave (III) should still take place. Therefore, after ending wave I in August 2021, one should expect a consolidation in wave II and the following acceleration in wave III of (III). The medium-term target for coming 1-2 years will be towards 1000 USD per 100 bushel and even higher. Investors and traders can be looking to buy the pullback in wave II in 3, 7 or 11 swings against 365 lows expecting more upside.

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Disclaimer: Futures, options, and over the counter foreign exchange products may involve substantial risk and may not be suitable for all investors. Leverage can work against you as well as for ...

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