Dow Jones released pre-report estimates of 2017 wheat production on Tuesday that point to the potential for a bullish data release in Friday's USDA report, although activity in the futures market has failed to reflect growing concern. The average of pre-report estimates has shown an expectation of other spring wheat production at 389 million bushels, down from the latest USDA estimate of 402 mb and 27% lower than the estimated production in 2016. Perhaps the key will be the estimate for harvested acres given the high rate of abandonment seen in the northern U.S. states this growing season.
The bullishness of this market has perhaps contributed to a recovery from the low reached on Sept. 20, although Tuesday's trade may be pointing to reservation among traders in advance of the report.
In Monday's trade, the December contract moved above the contract's 20-day moving average for the first time since July 21, while also closing above the downward-sloping trendline resistance drawn from the July 5 high of $8.43/bu for the first time. Monday's trade saw the December contract reach its highest level seen in 11 sessions.
Tuesday's session saw price fail to test Monday's high, while price on the December contract slipped back to close in negative territory and closer to the lower end of the session's trading range.
The middle study on the accompanying chart points to stochastic momentum indicators trending higher, although this momentum could be fading and bears watching.
The lower study on the chart shows the Dec/March spread (gold line) and March/May spread (blue line). The nearby spread, at minus 12 3/4 cents, has weakened 1 1/2 cents in the first two days of this week and points to a growing bearish view of fundamentals held by commercial traders as indicated by their actions in the market.
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