Activity during the past several weeks has seen wheat prices follow the surge in row crop prices, although wheat did the heavy lifting on Wednesday posting double-digit gains, led by the nearby winter wheat trade.
December 2021 hard red spring wheat followed the move in old-crop futures, closing 10 3/4 cents higher at $6.21/bushel (bu), its largest one-day move during the life of the contract and to a fresh contract high.
As seen on the continuous December chart attached, the December 2021 contract has reached the highest trade seen since August 2018. Retracement resistance is being tested at $6.22 1/2/bu, the 38.2% retracement of the move from the July 2017 high to September 2019 low. A breach of this level could result in a continued move to the 50% retracement, shown by the green horizontal line that is calculated at $6.64 3/4/bu. Prior to reaching this level, resistance from weekly highs on the chart ranging from $6.56 to $6.60 1/2 must first be cleared.
Spring wheat is currently viewed as the least bullish of the three major classes and this bears watching. Commercial traders have held a bearish net-short futures position since mid-October, while these 10 weeks reflect the longest stretch of a net-short position seen since March 2018.
As well as seen in the lower study of the attached chart, the December 2021/March 2022 futures spread has shown signs of weakness this week, weakening 2 1/4 cents to minus 4 1/4 cents, potentially signaling a growing bearish view of market fundamentals as determined by the commercial trade.
Cliff Jamieson can be reached at firstname.lastname@example.org
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