Canada Markets

The October rally which saw the December spring wheat contract move from a low of $5.25/bushel on Oct. 1 to a high of $5.86 1/2/bu on Oct. 30 may be over but the wheat market went on to post an interesting close today. Today's trade saw the three December wheat contracts end 2 3/4 cents higher for spring wheat, 3 3/4 cents higher for HRW and 5 3/4 cents higher for SRW, largely due to buying activity near the session's close.

The move came despite there being a number of factors working against higher wheat prices:

-- The United States dollar rallied today, hitting its highest level since June 2010. This move would normally have an inverse relationship with commodity values and would act to prevent or limit any move higher.

-- Spill-over from row crop trade. December corn finished 3 1/4 cents lower while November soybeans ended 19 1/2 cents lower, moves ignored by the wheat market.

-- Bearish export data from the U.S. DTN's analysis shows that year-to-date export inspections are 33% below year-ago levels, much steeper than the 21% drop that the USDA has estimated for the year.

-- Once again, Egypt, the world's largest wheat buyer, bought from France, an outcome which suggests that France's quality may not be as poor as once thought, along with a reminder of the fact that cheaper supplies exist outside of North America.

Perhaps supportive of wheat trade today was talk of delayed planting progress with respect to the winter crop in the States, although today's Crop Progress report may have eased those concerns, with 90% of the winter wheat suggested to be planted, 1% above the five-year average. Emergence is also ahead of normal, with 77% reported to be emerged as of Nov. 2 which is 5% above the five-year average. The 18 State crop condition shows winter wheat is suggested to be 59% Good to Excellent, below the 63% reported for the same time last year.

The spring wheat contract, however, is perhaps finding difficulty in finding the support it needs from either commercial or noncommercial traders to sustain a continued move higher. The middle study on the attached chart indicates gradually weakening spreads, a sign of growing commercial bearishness. The Dec/Mar spread (black line) has widened from minus 5 1/4 cents on Oct. 17 to minus 10 1/2 cents today (March trading over the December). The Mar/May spread has traded as narrow as minus 7 1/4 cents on October 22 to end at minus 8 3/4 cents today.

The non-commercial traders or investors are also showing their waning bullishness by reducing their net-long position in each of the past five weeks, as seen in the lower study. This position has moved from the Sept. 23 high of 10,772 contracts to the most recent long position of 4,606 contracts, after reducing the net-long position in each of the past five weeks to the lowest net-long held since Jan.14 of this year.

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

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