Both the September and December MGEX spring wheat contracts reached four-week lows on their respective charts this session. This week's two-point increase in the U.S. spring wheat condition to 70% good to excellent and the potential for movement out of Ukraine terminals have led to cautious trade, although it is interesting to note that the front-end spring wheat trade was the top performer among the grains on Aug. 3.
The September contract closed 2 cents higher at $8.75 1/4 bushel (bu) and the December settled 2 1/4 cents higher at $8.89/bu, the first higher close in four sessions for both contracts.
As seen on the attached chart, the December contract's $8.78/bushel low took out the July low of $8.82 3/4 bu this session to reach the weakest trade seen since early February, prior to turning higher to end in positive territory.
The lower study on the attached chart shows the Dec/March spread weakening to minus 14 cents on Wednesday, just 1/4 cent away from testing the weakest spread seen over the life of the contract. This is equal to or close to the spread seen in three of the past five years, while significantly weaker than the five-year average calculated at minus 6 1/4 cents.
One supportive feature in the spring wheat market is the declining noncommercial long futures position, which has fallen from an all-time high of 31,294 contracts as of Nov. 2, 2021, to just 8,172 contracts as of July 26. This is the smallest long position held in over two years, while nearing a test of the smallest held in over five years and will clearly affect the amount of liquidation we can face in the weeks ahead.
As noted in recent DTN commentary, it seems odd to be talking about a test of spring wheat support when the most recent WASDE report has pegged the U.S. hard red spring wheat carryout at the lowest level in 15 years for 2022-23. As stated in DTN Closing Grain Comments on Wednesday, DTN Lead Analyst Todd Hultman reminds us that even with larger crops forecast for Russia and Canada in 2022, global production is forecast to fall short of global demand in 2022-23 and global supplies are forecast tighter than the crop year that just ended.
Another factor that is weighing on trade is Ukraine's potential recovery as a shipper of grain into the global market. While one vessel of corn has been successfully shipped, there are reports that 17 more are loaded and no one seems willing to state just why there is no movement. Despite favorable media surrounding the deal signed and the movement of the first vessel, there remains a chance that this program is not designed for success and only time will tell. Ukraine continues to lack trust in Russia's involvement, and it is easy to see their point of view.
Cliff Jamieson can be reached at firstname.lastname@example.org
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