December spring wheat formed a bullish gap higher in Wednesday's trade, with Wednesday's low of $5.78/bushel one cent higher than Tuesday's high of $5.77/bu. After falling short in Friday's trade, today's move saw the May 1 high of $5.81/bu. taken out, with price nearing a test of the 2017 high of $5.88/bu. reached on Feb. 16.
As seen in the third study, the gold line represents the December 2017/March 2018 spread which has strengthened one cent so far this week to minus 4 1/2 cents, a sign of supportive commercial activity after trading as wide as 12 1/4 cents in early March. The black line on the lower study shows the Dec HRS/Dec HRW spread, which conveys the relative price between high protein spring wheat and lower protein hard red winter, or in other words, a signal of demand for protein. This spread has strengthened 6 3/4 cents so far this week to close at $1.04 1/2/bu. (HRS over HRW), the widest this spread has traded over the life of these contracts.
Last week's U.S. Wheat Associates Harvest Report shows just 14 samples of new-crop hard red winter wheat tested of the 530 they expect to test as of May 24, while the average protein is reported at 10.6%. While this is an early result, it is below the 11.2% final protein reported in 2016 that was viewed as a historically low level.
Meanwhile, the spring wheat crop is also showing reason for concern. The U.S. crop is estimated to be 96% planted as of May 28, which is ahead of the 91% five-year average. The initial crop condition rating was released at 62% Good to Excellent, down sharply from the 79% reported for the same week in 2016, while the five-year average is 72.8%, based on either the same week's data or the first released condition rating in June in the 2012 to 2016 period. This is the lowest Good to Excellent rating reported for this week (or seen in the initial early June condition rating) in nine years. DTN's Crop Condition Index, which assigns a weighting to each category from Very Poor to Excellent, calculates at 158 this week, which is the lowest level seen in four years.
Given a look back at the last 10 years data, early condition estimates could be viewed as a poor predictor of final crop potential, although this situation bears watching.
Saskatchewan and Alberta will release crop reports over the next two days and will show gains in planting achieved over the past week, although the northern regions continue to struggle with more rain in the forecast. Meanwhile, Agriculture and Agri-Food Canada's Percent of Average Precipitation map, as of May 30, shows Manitoba and most of Saskatchewan, or a line across the province from Saskatoon south, having received below average precipitation since April 1.
DTN 360 Poll
This week's poll asks which crop you believe will require the greatest focus and attention to detail when it comes to price risk management in the upcoming crop year. You can respond to this poll that is found on the lower right side of your DTN Home Page. Thanks to all for their past contributions to weekly polls.
Cliff Jamieson can be reached at firstname.lastname@example.org
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