It may seem that the spring wheat market has failed to react to harvest delays on the prairies, with the December contract continuing to struggle below $6 per bushel, although there are some signals that bear watching.
Spring wheat has performed well relative to winter wheat this week. At the end of Thursday's session, December spring wheat is down 0.3%, while December SRW is down 2.5% and December HRW is 2% lower. One difference in these markets is seen in the spread trade, with the December/March HRS spread narrowing for the fifth straight week from minus 16 1/2 cents in early September to minus 9 1/4 cents so far this week (March trading over the December). This represents a less-bearish approach to trade and the narrowest spread seen since late-May. The same spread in both the HRW and SRW markets signal bearish commercial selling.
This activity has held the December contract in a 12 1/2-cent range over the past seven sessions, while prices face a wall of chart resistance in the $5.92 to $5.97/bu range. This includes retracement resistance at $5.92/bu, the 33% retracement of the move from the August high to September low. The $5.97/bu level represents the 38.2% retracement of the same move, while the contract's 100-day moving average lies at $5.93/bu and the 50-day lies above at $5.95/bu. Last week's high lies at $5.98 3/4/bu, while psychological resistance lies at $6/bu. Clearing this level could result in a further move higher to the 50% retracement at $6.08 and perhaps even the 200-day moving average at $6.13 1/2/bu.
The lower study points to spring wheat growing in value relative to lower-quality hard red winter wheat, as measured by the spread in December futures, which acts as a proxy for the demand for higher-quality-protein wheat. The Dec HRS/Dec HRW spread settled at 75 3/4 cents Thursday (Dec spring wheat over Dec HRW), up 8 3/4 cents so far this week and is the widest spread seen since April 23. This spread has rallied back from 31 cents reported on Aug. 2. While this has failed to light a spark in protein premiums seen in cash markets in Minneapolis and in the PNW, it also bears watching.
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