Canada Markets

The weekly U.S. Drought Monitor report released today indicates a growing concern for some of the southern U.S. winter wheat areas, with crops coming out of dormancy to face a shortage of moisture and blowing soils. Areas of Oklahoma and Texas have received less than 10% of the normal moisture over the past 90 days.

Approximately 84% of Kansas is currently facing some degree of drought, up from 67% last week, while 77.25% of Oklahoma is facing some degree of drought, down from 80.67% last week and 64.2% of Texas is facing drought, up from 62.8% last week.

Also of interest is the forecast released by the U.S. Drought Monitor. The U.S. Seasonal Drought Outlook chart, which covers a forward period of March 20 to June 30, indicates that drought will persist or intensify over a significant area which includes the south central winter wheat growing areas in parts of Texas, Oklahoma and Kansas.

Since reaching its 2014 low of $6.07 3/4/bu. the week of January 27 on the continuous weekly chart, the HRW market has increased 28.7%, having moved above the resistance of the 50% retracement of the move from the September 2012 high of $9.48/bu. to the 2014 low of $6.07 3/4/bu., which is found at $7.78/bu. Should this market continue to hold above this level, the path may be cleared for a move to the 61.8% retracement at $8.18/bu., although psychological resistance at $8 may also be troublesome given a move higher.

The third study on the chart is a histogram representing the bullish nature of the non-commercial traders or investors. As of the most recent CFTC data up to March 12, investors have shown their continued willingness to add to their net-long position. The net-long position of 24,923 contracts is the sixth consecutive week that this position has increased, while also is the largest net-long position held since last November.

The lower study shows a narrowing of the new-crop July/Sept and Sept/Dec futures spreads. The July/Sept spread closed at a negligible carry of minus 1/4 cent in today's trade (September over the July) as indicated by the red line, a sign of growing commercial bullishness. This spread may very well trade as an inverse in upcoming days should the July continue to gain on the September, a sign that the wheat is in demand sooner than later. Carry in the Sept/Dec spread is also reflected by the higher trend in the green line, now trading at minus 7 cents, (December over the September) although this has narrowed from a minus 15 1/4 cent spread in mid-January.

Movements in this market will be of particular interest to Canadian sellers of both hard red winter wheat and Canada Prairies spring red wheat.

***

Just a reminder that there is only one day left to share your thoughts on spring moisture in your area on DTN's 360 Poll found on the lower right of your home page. Thanks for your support.

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

(ES)

© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.