Since Jan. 4, the March spring wheat contract has fluctuated within a 19-cent range, from a low of $5.61/bushel to a high of $5.80/bu, currently holding above support of the intersection of the 20-day and 50-day moving averages at $5.70 1/2/bu. Monday's trade saw this contract give up 3/4 cents, while consolidating within Friday's trading range in sideways trade as the market searches for direction. Monday's activity led to the formation of a perfect doji trading bar, with Monday's open and close equal at $5.74 3/4/bu.
There were signs of supportive commercial buying on Feb. 4 as trade consolidated within last week's trading range in sideways action. Monday's close is in the upper one-third of the range traded since Jan. 4.
On Feb. 1, DTN's National Average Basis in the United States was 38 cents under the March contract, which is weaker than the 16-cent basis reported for the same day in 2018 and the five-year average of 13.6 cents under the March contract. With U.S. exports of wheat trailing last year's pace overall, there seems no sense of urgency.
At the same time, price data for Saskatchewan's weekly No. 1 CWRS reported by Saskatchewan Agriculture on a weekly basis, when adjusted for movements in the Canadian dollar, shows the Feb. 1 basis at $24.41/metric ton under the March contract, reflecting a bid of $251.31/mt or $6.84/bushel, down from the crop-year high of $260.33/mt reported in the second week of the crop year. The basis, however, calculated as the different between the Canadian dollar value of the continuous active MGEX futures contract and the weekly reported bid from the government, is the narrowest or strongest seen since June 2016.
Over the period shown, there is no trend in terms of movement in this basis from early in the calendar year until the end of the crop year or July 31. In 2016, this adjusted basis weakened $18.05/mt from a low of $17.12/mt under the March contract on March 2 to $35.17 under the nearby contract on July 27. In the year following, it weakened from $30.81/mt on April 5 to a low of $76.26/mt as of July 26, or $45.45/mt. In 2018, this basis strengthened from a spring high of $56.94/mt on March 14 to a low of $39.95/mt under the March contract by July 11. Over the three years, this spot basis weakened an average of $15.50/mt from February through to the end of the crop year as we near new-crop availability.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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