Canada Markets

Perhaps wheat futures did not get the respect they deserved in today's market, but a number of positive signals are presenting themselves. In today's market, December corn closed 17 cents higher, November soybeans closed 26 1/2 cents higher, while in the wheat market, Chicago wheat ended 6 3/4 cents higher, Kansas City hard red winter wheat closed 3 1/2 cents higher and Minneapolis hard red spring wheat ended the session up 2 3/4 cents.

The attached chart shows the Minneapolis HRS December weekly contract. Today's session saw prices advance above yesterday's contract low of $7.35/bu, although a few challenges exist for wheat prices. First, red spring wheat remains in a downtrend, as shown by the downward sloping blue line, which began Nov. 28, 2012. Resistance from this trendline remains at $7.66/bu., which must be breached to signal an end to the downtrend.

Despite a bounce off of yesterday's low, prices this week have still failed to move above last week's high. To date, this week's high of $7.51 1/2/bu. is 1/2 cent short of testing the $7.52/bu. high of last week, which indicates the reluctance of traders to push this market higher.

There are positive signals, however. The second study shows the stochastic momentum indicators for the December weekly contract. As seen on the chart, these indicators have been oversold, or below 20 on the chart, since early July. This is a technical scenario that non-commercial traders look for, leaving the market prone to a change in trend should this group suddenly increase buying activity. In recent days, the faster moving %k line (blue line) has crossed the slower %D line (red) from the bottom, which is viewed as a bullish cross-over and an indication that downward momentum has shifted to upward momentum.

The third study indicates the recent trend of the Sept/Dec spreads, or simply the difference between these two futures. The hard red spring Sept/Dec spread (blue line), has seen its carry reduced from a low of 11 3/4 cents in early July to 3 1/2 cents as of today's trade. The Sept/Dec spread for the HRW contract, as noted by the black line, has narrowed from a 20 1/2 cent carry in early July (December above the September) to today's close of 3 1/4 cents. This is an indication of commercial bullishness and the desire to own stocks sooner than later indicating the potential of a front-loaded sales program, which could prove interesting given a crop which is a few weeks behind on both sides of the border.

The lower study indicates the trend in the net futures position held by the non-commercial trader group (investors), as reported weekly by the Commodity Futures Trading Commission, or CFTC. In this case, data is presented for the hard red winter contract, as of August 6. The chart indicates a recent change in sentiment among this group, where a net-short position (bets that prices will go lower) in red winter contracts was held over eight consecutive weeks, as noted by the most recent bars of the histogram which are pointing lower, while the latest report indicates a move to a net-long position of 1,714 contracts. Friday's data will confirm whether this group has continued to add to this long position.

While this week's USDA report was viewed as neutral for wheat, data released today suggested the prevented planting acres, or acres which were not seeded this spring, totaled 1.74 million acres in the United States, although the overall impact to the crop's production potential and prices given this data remain up for debate.

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

(ES)

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