Canada Markets

Commercials, Noncommercials Bearish Spring Wheat

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The upper study points to the trend in the Portland basis for 1 DNS 14% protein, now at its weakest level seen in almost two years. The lower study shows a weakening trend in futures spreads, also indicative of a growing bearish sentiment among commercial traders. The middle study shows the recent trend in the noncommercial net-short position held, now at the largest level in over 13 years and close to the largest net short held in CFTC records. (DTN ProphetX chart)

September spring wheat ended 5 1/4 cents lower on Wednesday to finish at $5.28 per bushel (bu), the lowest close seen this week, while holding above last week's $5.23 3/4/bushel contract low. The continuous active chart (not shown) points to potential support at the $5.19 1/2/bu level, while a string of weekly lows from January through August 2016 near $4.80/bu could be the next target given further downside.

For those following the December contract more closely, Wednesday's trade resulted in a 4 3/4-cent loss to $5.46 1/4/bu, while holding above last week's contract low of $5.42 1/4/bu.

The attached chart shows that spring wheat is lacking friends on the commercial and noncommercial side of the trade and can be viewed as the most bearish of nine market types that DTN analysis points to on a regular basis.

The upper study shows the No. 1 14% protein dark northern spring basis delivered to Portland, Oregon. On Tuesday of this week, this basis slipped to $1.00/bu over the September MGEX contract, while was reported unchanged on Wednesday. This is down from a recent high of $1.77/bu over the nearby reached on May 2, and is the weakest basis reported since late August 2016, almost two years.

Another response on the part of commercial traders is seen in the lower study, which shows a weakening trend in both the September/December futures spread (red line) and the December/March spread (green line). Both spreads have shown weakness over the course of this week and have weakened sharply over the past two months as this group gains confidence over the state of the crop.

Another bearish response given the actions of commercial traders (not shown) is seen in the spread between spring wheat and hard red winter trade, which can act as a proxy for the demand for higher-quality-protein wheat. The continuous active HRS/HRW futures spread closed at 40 1/4 cents (spring wheat over HRW), which is slightly higher than the June low of 39 cents, the weakest seen since March 2016. On Tuesday, the spread between DTN's National Spring Wheat Index and DTN's National Hard Red Winter Wheat Index ended at 29 1/4 cents, very close to the weakest spread seen since August 2015, almost three years.

The blue bars of the histogram shown in the middle study points to the net-short position of spring wheat held by noncommercial traders, or investors, at 9,412 contracts, the largest net short or bearish position held since January 2005, or more than 13 years. It would not take a large bearish move on the part of this group to result in the largest net-short position held as found in CFTC records.

Of the nine market types viewed in DTN analysis, based on the combinations of whether commercials and noncommercial are bearish, bullish or neutral, a bearish/bearish response as discussed suggests a marketing strategy that involves selling cash grain.

Cliff Jamieson can be reached at

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