Canada Markets

Friday's USDA data was viewed as bullish for wheat. Looking at U.S. data, ending stocks are set to shrink to 654 million bushels from last month's estimate of 698 mb, when the Dow Jones' average trade estimate was looking for a 704 mb carryout. Stocks are forecast to grow from 2013/14, increasing 10.8% from the 590 mb carryout last year, although not as great as expected.

The same situation is seen when looking at global data. Ending stocks for 2014/15 were reduced to 192.59 million metric tonnes from September's estimate of 196.5 mmt, also well below the Dow Jones pre-report trade estimate of 192.59 mmt. Global production was boosted to a new record of 721.12 mmt, while an almost 4 mmt increase in global demand helped keep stocks in check on paper.

Like the soybean and corn markets, wheat rallied upon the release of the report but failed to hold the gains. December Chicago wheat gained 5 1/4 cent after rallying as much as 15 1/4 cents today, while December hard red winter gained 5 cents after climbing as high as 14 3/4 cents. December hard red spring gained as much as 13 cents but gave it all back as investor selling pushed prices back into negative territory, with the close 1/4 cent below Thursday's close.

So why the bearish response? The same scenario played out in both the corn and the soybean markets -- better-than-expected data resulted in sellers taking charge. First of all, despite better-than-expected data, such as seen in corn and soybeans, these are still record crops and are ending in significant year-over-year jumps in ending stocks.

As well, the action in outside markets certainly is not conducive to investors feeling safe in any market. Bloomberg reported Friday that the Bloomberg Commodity Index is trading near the lowest traded since 2009, with growing supplies in some commodities, such as grains, combining with economic slowdowns in both China and Europe weighing heavily on markets. Recent volatility in equity markets is another example of money fleeing the markets.

As seen on the attached chart, The December spring wheat future has posted gains over each of the past two weeks. Note that these weekly gains came after a doji candlestick was printed on the week of Sept. 22, which resembles a cross where the week's open and close were very close to being equal. This is a sign of balance between buyers and sellers but often can signal a change in direction.

This week's trading bar on the candlestick chart could be viewed as an inverted hammer. This is a candlestick often seen at the end of a downtrend. It has a long upper wick or shadow and a short body, created when the open and the low are close to the same price, along with a higher close. While the sellers refused to allow a close near the week's highs, their resolve was tested through the week with the buyers or bulls in control in the end.

Also of interest is the lower study. The December/March spread (black line) for spring wheat has narrowed 7 cents since mid-September, a sign of commercial buying interest and a less bullish sentiment across this group. The blue line represents the March/May spread, which is also narrowing and indicating a less bearish fundamental situation.

Next week's trade will shed light on where markets go from here.

Happy Thanksgiving!

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(AG)

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