Canada Markets

Old-Crop Spring Wheat Prices Eye a Breakout

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Since Nov. 28, the March hard red spring wheat contract has continuously tested retracement support at $5.42 1/4/bu., while closing above this level for only the second time on Wednesday. Today's high was 1/4 cent short of testing the Dec. 16 high of $5.45 3/4/bushel. A breach of this level could result in a further move to $5.54 3/4/bu. As indicated on the lower-study, the March/May inverse is testing resistance, ending at 4 cents today. (DTN graphic by Nick Scalise)

The March MGEX spring wheat future retraced from the contract's Dec. 16 high of $5.45 3/4/bushel to a low of $5.30/bu. by Dec. 23. Support was found at this level for four consecutive sessions, a level which previously acted as resistance that acted to prevent a move higher through most of November.

Wednesday's 7 cent move higher saw the March contract come back within 1/4 cent of the March 16 high, while closing near the upper-end of today's 8-cent trading range. Today's move represented the seventh time that the contract has closed above its 200-day moving average since Nov. 29, calculated at $5.38/bu., while is only the second time that price has closed above resistance of $5.42 1/4/bu., which is the 50% retracement of the move from the contract's June high to the contract's August low.

Technically, the market seems at a make-or-break point, with the market either moving lower after forming a triple-top on the daily chart in and around $5.45/bu. (Nov. 29, Dec. 16 and Jan. 4), or a breakout above $5.45 3/4/bu. A sustained move above today's resistance at $5.42 1/4/bu. could lead to a further move to $5.54 3/4/bu., the 61.8% retracement of the earlier discussed downtrend. While not shown, the continuous active weekly chart points to previous highs ranging from $5.57/bu. and $5.60 1/4/bu. which is the upper-end of the 60-cent range which has confined trade for more than 17 months on the long-term chart.

While global wheat fundamentals have not changed with 2016/17 on-track for a record carryout, the one bright spot is seen in high quality wheat, which is helping support a move higher for spring wheat during a period when seasonal influences tend to drive prices lower into late February, as seen on DTN's Five-Year Seasonal Index.

USDA reports of railcar bids for dark Northern spring wheat at Portland point to a continued strengthening of bids for higher proteins to access export supplies, which will also indicate the trends seen off Canada's West Coast. Since Aug. 1 or the beginning of the Canadian crop year, the basis for 1 DNS 13% protein has changed little. The mid-point of the range of basis levels reported has weakened 1 1/2 cents USD between Aug. 1 and Jan. 4 to 64 cents over (mid-point of the 40-to-88 cents range over the March future.

The reported spread between 13% and 16% protein wheat, however, has increased substantially since Aug. 1. On the first day of the crop year, the mid-point of the reported range of basis levels pointed to a spread of 61 cents USD from 13% to 16% protein. This spread was reported at $1.16 1/2 on Wednesday, after slipping from $1.26/bu. on Tuesday.


DTN 360 Poll

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