A World Grain piece titled Unprecedented Volatility Impacting Millers highlights a recent panel of flour millers at a Global Grain Conference in Geneva Switzerland. "Not many people in the industry have seen volatility like this -- not just in the raw material price, but in the energy, and the logistics, supply chain," stated Scott Wellcome, a risk management official from Hamburg, Germany.
He goes on to stress the importance of risk management, indicating that "we have these challenging times for another 12 to 18 months."
Closer to home, the December 2022 MGEX hard red spring wheat contract closed 7 cents higher on Dec. 22, closing at $9.31/bushel (bu) while reaching a 16-day high. Trade remains above all major moving averages, such as the 20-day moving average shown on the attached chart, while today's high was only 7 cents away from the contract high of $9.40/bu, reached on Nov. 29.
Of interest is the Dec/March futures spread, as indicated by the blue line on the first study. This spread points to a bullish inverse, strengthening 3 1/4 cents this session to 12 3/4 cents, with the December contract closing over the March. Looking back at this date over recent years, this spread was shown at a 4 1/4-cent carry on this date in 2020, while has averaged close to an 8 3/4-cent carry on this date over the past five years.
In two of the past five years, this spread never reached inverted territory until the month of June, once in the month of November just prior to the December expiry, while two of the five years did not see this spread reach inverted territory, where the December traded above the March.
The lower study shows prices entering overbought territory, which may slow speculative buying. At the same time, today's high was only 7 cents from testing the contract high of $9.40/bu, while a breach of this level could trigger increased buying interest.
Cliff Jamieson can be reached at email@example.com
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