Canada Markets

December Spring Wheat Reaches Fresh Low

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The December 2019 spring wheat contract took out its March low on Wednesday to reach a fresh contract low of $5.64/bushel. The first study shows the Dec19/March20 spread narrowing, a sign of supportive commercial buying, with investors growing bearish. The lower study shows noncommercial traders holding a new-short position of six futures contracts, as of March 26, the smallest bearish position seen since last September. (DTN ProphetX chart)

The December spring wheat contract lost 3 3/4 cents on Wednesday to end at $5.66 1/4 per bushel, while ending closer to the lower-end of the session's trading range.

Despite supportive commercial activity seen this session, with the December/March spread narrowing by 1/4 cent to minus 13 1/2/bu., noncommercial traders have set direction for the contract.

As seen on the histogram on the lower study, noncommercial traders have reduced their bearish net-short position in spring wheat futures from 12,717 contracts for the week of December 31, the largest net-short reported in CFTC data going back to March 1989, to just six contracts as of the most recent March 26 data. This move alone could be viewed as bearish for prices, with an apparent change of heart experience by this group leading to increased selling.

The stochastic momentum indicators shown in the second study are just entering oversold territory on the chart, which could slow technical selling, although this doesn't mean the bottom has been reached. The continuous December spring wheat chart (not shown) points to potential nearby support of $5.60 1/2/bu., the Sept. 10 weekly low, while potentially preventing a further slide to the July low of $5.42 1/4/bu.

Independent analyst Informa's April World Crop Report may point to more of what we've been seeing in global wheat markets in the year ahead. The group's forecast for global wheat production was increased over the past month to 770.029 million metric tons, up 5.3% from its estimate for 2018 and would reflect record global production. This is despite United States seeded acres that are estimated to be the lowest on record, a reminder of the growing competition faced elsewhere in the world.

Of the eight major exports in the world, the Informa estimates for 2019-20 suggest that all eight will realize a year-over-year increase in all-wheat production, setting the stage for increased competition between exporters.


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