December hard red spring wheat futures closed 27 3/4 cents higher on Tuesday, Feb. 22, reaching a fresh contract high by taking out the $9.41 3/4 bushel (bu) high reached on Dec. 27. This move was extended with a 21 1/4 cent gain Wednesday, Feb. 23, to close at $9.73/bu on sharply higher volume, as seen in the lower study of the attached chart. A total of 1,404 contracts traded, up for a fourth consecutive session and 165% higher than the previous session.
While not shown, the continuous December chart shows Wednesday's close breaching resistance of the 50% retracement of the move from the November high (Dec 2021 contract) to the January low (Dec 2022 contract) calculated at $9.68 1/4 bu, which may clear the way for a further move higher to the 61.8% retracement at $9.96/bu.
Another interesting study is the new-crop Dec22/March23 contract spread. The current inverse has strengthened for a third straight session to 7 cents (December over the March). One year ago, this spread traded at minus 2 cents, or a 2-cent carry, while on this date on average over the past five years, this spread has averaged minus 7.35 cents. This is a bullish signal of front-end demand in the 2022-23 crop year, while the last time the new-crop Dec/March spread was shown at an inverse on this date was in February 2008, or the Dec08/March09 contract spread. This bears watching and may be signaling spring wheat's lack of competitiveness with competing crops.
Not shown is last week's CFTC data that shows noncommercial traders increasing their bullish net-long position in spring wheat futures by 28.4% or 2,612 contracts as of Feb. 15, the largest bullish position seen in six weeks. It is expected the next report will continue to show a growing appetite to position on the long side by speculative traders.
The lower study shows daily volume growing for a fourth day to the 1,404 contracts traded in the December 2022 contract on Feb. 23.
Cliff Jamieson can be reached at email@example.com
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