Canada Markets

It seems like the wheat market can't catch a break, with today's report viewed as bearish for wheat. United States' ending stocks of all wheat were reported to be higher than the average of pre-report estimates, global ending stocks were reported higher than pre-report average estimates and the December 1 quarterly stocks were reported to be higher than pre-report estimates.

As seen on the attached chart for March MGEX HRS, the nearby March contract fell for the fourth consecutive day by 8 cents, settling below the $6 mark for the first time since November 24. Today's close of $5.95 1/4 remains just above the 61.8% retracement of the move from the October 1 low of $5.41 to the December 18 high of $6.80 1/4/bu.

While the weakness has hit all three classes of wheat, hard red spring is appearing stronger relative to the other two classes. Since reaching highs on December 18, HRS has lost 12.5%, HRW has lost 16.3% and SRW has fallen by 17.9%. Most recent CFTC data as of January 6 shows investors more committed to holding long positions in red spring wheat, reducing their net-long in SRW for the third consecutive week, reducing their net-long position in HRW for the second consecutive week while increasing their net-long position in HRS for the third consecutive week to the highest level held in 12 weeks.

Today's report also suggested that despite a 33 mb increase in U.S. wheat ending stocks, more than expected, this was almost entirely due to an increase in HRW and SRW ending stocks due to a reduction in domestic demand, while HRS ending stocks were reported to fall by 2 mb from last month and have fallen in each monthly report since October.

Also of interest is the lower attached study on the attached chart. The spread between HRS and HRW continues to narrow, with March HRS closing at a 4 3/4 cent premium to March HRW in today's trade, with January 8 being the first time since August that HRS has traded at a premium to HRW, a sign of growing interest for protein wheat. The continuous active chart would indicate that spring wheat hasn't traded consistently higher than HRW since before late September 2013.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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