December 2021 spring wheat gained 8 cents on Monday to reach a fresh contract high of $6.71 1/2 per bushel (bu), while also closing at the session's high. Spring wheat was the only class to reach this high Monday, although both December soft red winter wheat and December hard red winter contracts moved closer to their respective Jan. 15 highs.
A look at the continuous December HRS chart (not shown) shows Monday's move resulting in the highest Dec trade seen since August 2017. A sustained move above $6.64 3/4 cents this week, which is the 50% retracement of the move from the $8.43/bu 2017 high to the 2019 low of $4.86 1/2/bu on the continuous December chart, could lead to a further move to the $7.07/bu level, which is the 61.8% retracement of the same downtrend.
While the wheat market is known for head-fakes, the attached chart shows a break above the resistance line on Feb. 18, a loss in Feb. 19 trade and a continued move higher on Feb. 22. Technical analysis theory would indicate the breakout from this pattern could lead to a continued move that would duplicate the length of the flagpole of this pattern, or the move from the Dec. 8 low to Jan. 15 high.
Using the Feb. 18 breakout as a starting point at $6.62/bu, this would indicate a potential upside target of $7.52 1/4/bu, which would take us close to a test of the August 2017 high of $7.53 3/4 on the continuous December chart.
The lower study shows the Dec '21/March '22 futures spread struggling to stay in inverted territory in January and February (Dec trading over the March), while moving into a carry market on Feb. 10. Despite the contract high reached this session, this spread weakened by a modest 1/4 cent to minus 2 cents, although can still be viewed as a bullish signal when compared to the full commercial carry to store grain from December to March.
On the fundamental side, spring wheat is forecast to lose acres relative to other crops on both the Canada and the U.S. side that should prove supportive. This bears watching, along with the North American winter wheat crop as it breaks dormancy in the weeks to come.
Cliff Jamieson can be reached at firstname.lastname@example.org
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