Canada Markets

The December contracts across all three exchanges broke resistance this session. Chicago soft red winter wheat broke through the recent Oct. 8 high of $6.99 3/4 per bushel while also pushing further through the psychological $7.00/bu. level to end the session at $7.05 3/4/bu., up 19 3/4 cents. This is the first close above $7/bu. since June 24 as two days later on June 26, prices broke through support at $7/bu. and have remained below this level almost entirely since that time.

The December hard red winter wheat contract also posted a 19 3/4-cent gain this session, breaking through the contract's 200-day moving average at $7.63 1/2 to close at $7.68 3/4/bu. This is the first close above this moving average since early February of this year.

Attached is the December hard red spring wheat daily chart. Since the contract's high of $9.65 1/4/bu. was reached on Sept. 14, this wheat future has shed $2.68/bu. or 27.8% to reach a low of $6.97 1/4 on Sept. 23. Since Sept. 23, wheat has rebounded 63 cents or 9% to end at today's close of $7.60 1/4/bu., a 13-week high for the contract.

As seen on the lower right of the attached daily chart, HRS wheat broke through the resistance of the contract's 100-day moving average, seen by the downward-sloping brown line which closed at $7.54 1/2/bu. in today's session. HRS wheat prices have followed this moving average lower since it was broken and became resistance in December 2012. Since Oct. 3, this moving average has acted as resistance on numerous attempts to move higher.

Should prices find a way to hold above the 100-day moving average which may now shift to act as support, a continuation of this trend may see resistance be tested at the 38.2% retracement of the previously mentioned downtrend at $7.99 1/2.

The downside to this price action is the fact that the monster crop on the Prairies has led to challenges which are apparent in the widening cash basis seen for red spring wheat. The average cash basis started the crop year on Aug. 1 at 64 cents under the nearby future and has widened to $1.20/bu. under the December in today's trade. For comparison, yesterday's National Average Basis in the U.S. was 40 cents under the December, which may present opportunity for movement into U.S. facilities for producers situated along the border.

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

(ES)

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