While the six-state spring wheat crop condition rating in the United States has been reported as the lowest seen since 1988 and a downgrade in Canada's production potential is expected, the December hard red spring wheat contract continues to drift sideways.
Aug. 9 trade saw the December close 7 3/4 cents lower, at $8.95 1/2/bushel (bu), failing to sustain a move above $9/bu USD for the third time in four sessions. Trade remains above the contract's 20-day moving average, while has consolidated well within last week's range.
Here are a few things to consider when looking at the attached chart.
The lines on the first study show the September/December futures spread (red line) and the December/March futures spread (brown line). While the front-end spread strengthened 1/4 cent this session to 13 1/4 cents (Sept over the Dec), the later Dec/March spread weakened 1/2 cent to an 11 1/4-cent inverse. Both reflect a bullish view of fundamentals, but the nearby spread has crossed above the later spread (red line above the brown line), signaling a growing bullish view in front-end trade. This bears watching.
The blue bars of the histogram in the second study reflects the noncommercial net-long position spring wheat futures position. While this has been reported by the CFTC in a narrow range during the past seven weeks, the percentage increase reported in the past week from 10,479 contracts to 13,734 contracts, calculated at 31.1%, is the largest week-over-week increase seen since late April or 15 weeks.
Lastly, the August 9 trade volume of 3,254 contracts is close to the lowest daily volume seen in nine sessions. While profit-taking was seen this session, as it was across several other markets, spring wheat sellers can be viewed as disciplined and lacking conviction.
Cliff Jamieson can be reached at email@example.com
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