While spring wheat fared much better in Monday's session than winter wheat, all contracts followed winter wheat lower, with fresh contract lows reached. As seen on the attached chart, the December contract high in Monday's session failed at the contract's 20-day moving average, as it has done several times since late June, only to reach a fresh contract low of $5.19 1/4 per bushel and close 8 3/4 cents lower at $5.22/bu.
The most active spring wheat contract was the September contract, while a look at the continuous active chart (not shown) has Monday's September low at $5.06 1/4/bu., while chart support lies at the April 30 low of $5.06/bu. and again at $5.04/bu., last reached in November 2016. A move through this support could lead to a full retracement to the 2016 low of $4.80 1/4/bu.
Other forces may combine in order to support prices as they near chart support. DTN's 5-Year Seasonal Index chart (not shown) indicates that over the past five years, prices tend to form a base in late August after a seasonal downtrend that begins in the previous February. As well, as of Aug. 9, spring wheat futures closed at the 11th percentile of the five-year range and close to its lowest point in nine years, which could lead sellers to question their resolve. Today's chart also points to the stochastic momentum indicators (lower study) entering oversold territory on the chart, which could also act to slow noncommercial activity.
As seen on the lower studies of this chart, spring wheat could be viewed as the most bearish of market types, with both the commercial and noncommercial sides of the market showing bearish actions. As seen in the first study, the Dec19/March20 spread weakened 1 1/4 cents to close at minus 15 cents, which is the weakest level seen since July. While not shown, the 30-minute chart shows this spread trading as wide as 15 3/4 cents this session.
The blue bars on the following histogram show the noncommercial side of the trade increasing their bearish net-short futures position over six consecutive weeks to the largest bearish position on record at 12,973 contracts net-short as of Aug. 6.
Monday's USDA report could be viewed as neutral for spring wheat overall, with U.S. 2019-20 ending stocks revised only slightly lower to 322 million bushels, a volume that remains a bearish 22% higher than realized in 2018-19 while representing a bearish 56.1% of annual use. This would be the largest carryout since 1987-88.
At the same time, weather remains key, with the seven-day forecast showing chances of precipitation over much of the Prairies, along with North Dakota and Minnesota, that will add further delays to harvest/maturity when combined with lower-than-average daytime highs expected over much of this region over the next five days.
The past week's harvest progress could also be a supportive feature, with an estimated 8% of the crop harvested in the U.S., as compared to the five-year average of 30%. Last week, the harvest was estimated 12 points behind average and this week this has grown to 22 points behind average. This time last year, an estimated 32% was harvested, while current estimates represent the slowest pace since 2014 when 6% was complete as of Aug. 9.
Cliff Jamieson can be reached at email@example.com
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