Canada Markets

December Spring Wheat Ends the Month Below $5/Bushel

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The December spring wheat contract closed below support of $5/bushel on Friday, while ending with the lowest close on the continuous active monthly chart seen since August 2016. This chart shows potential long-term support between $4.77/bushel and $4.82 1/4/bu., with the lower-end of the range reached in September 2009. The lower study shows the non-commercial net-short position held, which has grown larger over 10 consecutive weeks to a fresh record of 16,497 contracts. (DTN ProphetX chart)

December spring wheat finished 4 3/4 cents lower on Friday at $4.96 3/4 per bushel, its 15th lower close in 19 sessions. The continuous active weekly chart would indicate this the first sub-$5 close since September 2016, while the first close below $5/bushel on the monthly chart since August 2016.

Spring wheat wasn't alone, with both December hard red winter wheat and December Paris milling wheat reaching fresh contract lows, while soft red winter wheat broke lower from its recent range to reach its lowest level traded since May. The Dec/March futures spreads weakened across all of these contracts, a sign of growing commercial bearishness adding to probable noncommercial selling.

The continuous active monthly spring wheat chart shows that lows of $4.77/bu. were reached in the months of September and October of 2009. This low is depicted by the horizontal red line on the attached chart. Since then, there has been six monthly lows ranging from $4.80 1/4 to $4.82 1/4, taking place in March, April and June of 2010 and again in January, July, August and September of 2016. This range of long-term lows could prove to be the next major test for spring wheat given further downside.

Despite deeply oversold stochastic indicators, noncommercial traders continue to add to their bearish net-short position in spring wheat. As of Aug. 26 data, this position has grown larger for 10 consecutive weeks to 16,497 contracts, with a fresh record set in each of the past four weeks.

At the same time, such a large net-short could prove bullish for the market in that any scare on the supply side, such as extended harvest delays, could result in short-covering as shorts take cover.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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(ES)

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