Spring Wheat Leads the Wheat Complex With Double-Digit Move
Positive technical signs are seen on the December MGEX spring chart. Tuesday's high of $5.33/bushel (bu) is the highest level traded in one month, while the weekly chart points to a four-week high reached in Tuesday's trade, a bullish technical signal, but a move that will require confirmation of a bullish close on the weekly chart as of Friday's close.
Tuesday's close also ended above the contract's 50-day moving average for the third time in four sessions. In addition, a downward-sloping trendline drawn from the contract's $6/bu high reached on Jan. 22 was breached on Aug. 25, with today's close of $5.30 1/4/bu above the $5.29 1/4 resistance found on this trendline.
CFTC statistics as of Aug. 18 showed noncommercial traders (blue bars on the lower study or histogram) paring its bearish net-short position for the first time in eight weeks to 18,752 contracts. It is important to note that as of Aug. 11 data, this position was just 1,230 contracts, or 5.4%, below the record bearish net-short position held on May 19.
The middle study shows that despite the move higher that began in mid-August, stochastic momentum indicators have yet to reach overbought territory as of Aug. 25, which suggests a further move higher is possible. Resistance lies at $5.34 1/4/bu, the contract's 100-day moving average, while $5.42 1/4/bu is the 33% retracement of the move from the contract's high to the recent contract low reached in August.
While there is spillover support stemming from both soybeans and corn as we traders watch both the supply-and-demand potential for the year ahead, there is anecdotal reports of disappointing spring wheat yields in areas of the northern states. While the USDA's weekly Crop Progress report shows an increase in the overall spring wheat crop condition from 70% to 71% good to excellent, the North Dakota rating fell from 65% to 63% good to excellent, the lowest of the six states monitored. The USDA's Crop Production report estimated this state's acreage to represent 48.6% of the area seeded in the U.S., while this week's progress shows harvest at 39% complete as of Aug. 23, or 20 percentage points behind the five-year average.
The first prairie crop report for the week is seen from Manitoba, which reports 23% of the province's spring wheat is harvested, behind the three-year average of 50%, with showers over the past week leading to delays. Yields are reported to be average to slightly below average. Four of the five regions are reporting spring wheat harvest taking place, with a range in estimated yields from 50 bushels per acre to 100 bpa, with the five-year average calculated at 56.6 bpa.
While Statistics Canada's first production estimates will be released on Aug. 31, Agriculture and Agri-Food Canada updated its estimate in its August supply-and-demand estimates on Aug. 25, based on unofficial estimates. AAFC increased its production estimate from the previous month by 800,000 metric tons to 28.4 million metric tons (excluding durum), which would be a record level of Canadian spring wheat production, up 10.6% from 2019.
Meanwhile, one media piece pointed to producers saying "not so fast" to the bumper crops being forecast, after weeks of high temperatures across the southern Prairies trimmed crop potential in many areas.
The official Canadian production estimates will be released on Aug. 31, while are based on July surveys. The results from this report may be the subject of debate going forward as results will fail to capture the high heat in August in the western provinces.
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Cliff Jamieson can be reached at email@example.com
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