The December spring wheat contract lost 9 1/2 cents on Monday to reach a fresh contract low this session, closing near the lower end of the session's trading range. There are signs of bearish selling coming from both the commercial and noncommercial side, which makes for a bearish combination as prices search for support.
The attached chart shows the historic price movements on the continuous December weekly chart, which shows the movements of the December 2015 contract, followed by December 2016 and so on. Potential support from major retracement levels have already been broken. At the same time, potential weekly lows at $5.53 1/2, the May 15 2017 low as well as $5.44/bu, the April 10 2017 low could act as key support levels, both shown by dotted red lines. The next potential level may be found at $5.04/bu, the November 7 2016 low followed by psychological support at $5.00/bu and the 2016 weekly low of $4.80 1/4/bu.
Both commercial and noncommercial traders can find little reason to buy at present. The red bars of the histogram on the middle study show the noncommercial net-futures position moving from a bullish net-long position to a bearish net short. This is the first net-short position seen since April 2017 and the largest seen since September 2016. A combination of favorable weather conditions along with growing concerns surrounding trade relations between the United States and its trading partners has investors in all commodities growing nervous.
The lower study represents the futures spreads as determined by the forward trade of mostly commercial traders. The blue line represents the Sept/Dec spread, which weakened to minus 15 3/4 cents this session, while the green line represents the Dec/March spread that weakened to minus 15 1/4 cents this session. Both have weakened substantially over the past month as commercial traders show an increasing comfort level with crop prospects.
While not shown, spring wheat is also facing its seasonal tendency that would normally reach a peak in early July only to drift lower into late August. DTN's 5-Year Seasonal Index chart would suggest this seasonal high for the front-month contract was reached 4 to 5 weeks early this spring, with the typical downtrend in place. Front month weakness is also a bearish drag on new-crop trade.
DTN 360 Poll
Given that current government estimates are pointing to a large year-over-year increase in ending stocks for a number of grains, this week's poll asks which of these crops you are least likely to market prior to new crop arrival. Please weigh in with your thoughts on this week's poll, found at the lower right of your DTN Canada Home Page. Thanks for your participation.
Cliff Jamieson can be reached at firstname.lastname@example.org
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