Canada Markets

December 2021 HRS Reaches Fresh Contract High

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The December 2021 spring wheat contract reached a fresh contract high this session and the highest trade since August 2018 on the continuous December chart. The move is nearing resistance of the 38.2% retracement of the move from the 2017 high to the 2019 low at $6.22 1/2/bu. The lower-study shows the Dec. 21/March 22 futures spread weakening this week. (DTN ProphetX chart)

Activity during the past several weeks has seen wheat prices follow the surge in row crop prices, although wheat did the heavy lifting on Wednesday posting double-digit gains, led by the nearby winter wheat trade.

December 2021 hard red spring wheat followed the move in old-crop futures, closing 10 3/4 cents higher at $6.21/bushel (bu), its largest one-day move during the life of the contract and to a fresh contract high.

As seen on the continuous December chart attached, the December 2021 contract has reached the highest trade seen since August 2018. Retracement resistance is being tested at $6.22 1/2/bu, the 38.2% retracement of the move from the July 2017 high to September 2019 low. A breach of this level could result in a continued move to the 50% retracement, shown by the green horizontal line that is calculated at $6.64 3/4/bu. Prior to reaching this level, resistance from weekly highs on the chart ranging from $6.56 to $6.60 1/2 must first be cleared.

Spring wheat is currently viewed as the least bullish of the three major classes and this bears watching. Commercial traders have held a bearish net-short futures position since mid-October, while these 10 weeks reflect the longest stretch of a net-short position seen since March 2018.

As well as seen in the lower study of the attached chart, the December 2021/March 2022 futures spread has shown signs of weakness this week, weakening 2 1/4 cents to minus 4 1/4 cents, potentially signaling a growing bearish view of market fundamentals as determined by the commercial trade.

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