Spring planting delays were dead center on the radar in Tuesday's futures trade across the grains, following Monday's USDA Crop Progress report. Spring wheat data shows United States spring wheat planting estimated at 45% complete, below the 54% completed as of May 12, 2018 and the five-year average of 67%.
The attached chart points to the uncertainty surrounding this situation given the noncommercial short-covering seen across the grains on Tuesday. The December MGEX daily chart shows price breaking above a series of daily highs reached over the past eight sessions. Tuesday's session high shows a full 10-cent rise in price which was reduced to a 4 1/4-cent gain by the end of the session. Tuesday's close ended near the middle of the session's trading range, while ending above the contract's 20-day moving average for the first time since March 27.
The lines on the first study reflect the September/December futures spread (brown line) and the December/March spread (black line). As seen on the chart, these two spreads diverged this session, with the Sept/Dec narrowing to minus 13 1/2 cents while the Dec/March widened or weakened to minus 14 1/2 cents. These spreads are influenced by commercial trade in forward positions, while in this case reflect a conflicted view of market fundamentals.
Given a further move higher, resistance may be found at the contract's 50-day moving average at $3.39 3/4/bushel, while the 33% retracement of the move from the contract's August 2018 high of $6.73/bu. and the contract's May 2019 low of $5.29 1/2/bu. is calculated at $5.77/bu. that may also act to limit upside potential.
A Fundamentally Speaking study by DTN Contributing Analyst Joel Karlin titled Spring Wheat Planting Delays (https://www.dtnpf.com/…) may shed light on the challenges in interpreting late planting of spring wheat across the northern states. While stating that "the general consensus is that late plantings can result in less planted acreage than had been anticipated and a tendency for below-trend yields," the study concludes that later-than-normal planting does not automatically lead to a drop in acres and reduced yields. One only has to go back one year to see that spring wheat planting was behind normal as we entered May, while in the end the final acres were 575,000 higher than early intentions while the average yield reached a record high.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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