Canada Markets

September Spring Wheat at a Crossroads

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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September MGEX hard red spring saw a breakout lower from the chart consolidation pattern traded since June 1, while also closing below the contract's 50-day moving average. At the same time, this contract held above $12/bu, as well as the 38.2% retracement of the move from the January low to May high. The lower study shows the Sept/Dec spread moving to a carry market in recent trade. (DTN ProphetX chart)

Spring wheat futures closed lower on June 15, with the September contract closing 7 cents lower at $12.01 1/2 per bushel (bu), a second consecutive lower close.

Since June 1, the September MGEX spring wheat contract has traded in a pennant chart pattern, formed by converging trendlines, which saw price breakout lower in June 15 trade with a breach of the lower support line.

Today's move breached trendline support seen at $12.09/bu. The move also resulted in a close below the contract's 50-day moving average at $12.09 1/2/bu. This is the first close below the 50-day since Feb. 8.

At the same time, supportive features remain to be tested. The first is the June low of $11.90/bu, with today's low of $11.91 3/4/bu within 1 3/4 cents from testing this low. As well, the four closest contracts, from the July to the March 2023 contracts, all bounced from session lows above $11.90/bu to close above $12/bu on Wednesday.

Finally, support lies at the 38.2% retracement of the move from the Jan. 18 low to the May 17 high, calculated at $11.94 1/2/bu (horizontal red line), with today's low dipping below this support only to bounce higher and close above it. A breach of this move could result in a further slide to the $11.29 1/4 level.

The first study indicates a bearish signal with the September/December futures spread moving from a bullish inverse on June 13 to a modestly bearish carry on June 14, while this spread weakened further on June 15 to minus 2 1/4 cents, the weakest spread seen in two months. On this day in 2021, this spread was reported at minus 1 1/2 cents, while moved to an inverse on the following day. The five-year average for this spread in mid-June is minus 7 cents.

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