Canada Markets

Since reaching a May 7 high of $8.10 bushel (bu), the December MGEX hard red spring wheat contract has retraced close to 61.8% of its move from the April low to May high, calculated at $6.96/bu, which is viewed as a potential support level based on Fibonacci retracement theory. The contract's 50-day moving average adds yet another level of potential support at $6.98 1/4 bu.

On Wednesday, trade dipped to a low of $6.99/bu, but recovered to close above $7/bu at $7.10 1/4 bu. Thursday's trade saw prices consolidate within Wednesday's range, reaching a low of $7.01 1/4 while closing at $7.08/bu. Psychological support at $7/bu may also be playing a role.

New-crop spring wheat held above support Thursday, a day when hard red winter wheat for July delivery pushed below its 61.8% retracement level while soft red winter wheat remains below its 50% retracement after breaching this support on May 19.

While not shown, Thursday's volume of 445 contracts reported for the December contract is the lowest daily volume seen since trade on April 5. Despite the bearish move seen in the winter wheat trade, the number of traders willing to step up and sell new-crop spring wheat is waning.

The blue bars of the histogram on the lower study shows the noncommercial net-long position in spring wheat futures at 20,569 contracts as of the most recent CFTC data on May 11, up for the fifth week and the largest bullish position seen since June 2011.

On Thursday, Saskatchewan Agriculture rated the province's topsoil moisture at 20% adequate, 48% short and 32% very short. This shows deterioration from the previous week when 31% of the province was rated with adequate topsoil moisture and 23% was rated very short.

In addition, Thursday's U.S. Drought Monitor showed 16.7% of North Dakota was rated as facing D4 or Exceptional Drought, the first time this category has been reported for the state this season.

While current forecasts show widespread precipitation for the northern states and Canadian Prairies over the next seven days, traders may show caution until this verifies and even then may need to see additional precipitation in extended forecasts prior to selling.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on Twitter @Cliff Jamieson

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