Canada Markets

December HRS Gains as Focus Turns to New Crop

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December spring wheat gained 57 3/4 cents during the past week, its first higher close in three weeks. The first study shows the December/March spread remaining inverted. The middle study shows the stochastic momentum indicators have yet to reach the overbought region, signaling the potential for more upside. The histogram bars on the lower study shows the noncommercial net-long position falling as of March 22 for the first time in six weeks. (DTN ProphetX chart)

A March 24 wheat webinar hosted by Gro-Intelligence indicated that approximately 75% of the world's wheat crop is either already planted or at some stage of growth. A significant acreage expansion cannot happen until fall when winter wheat crops are planted, while spring wheat crops cannot expand enough to meet the lost production that is expected to result from the Ukraine-Russia conflict, a volume that is widely debated on social media platforms.

This scenario should remain supportive for new-crop spring wheat trade, although wheat will continue to face fierce competition from other crops for acres.

December spring wheat closed 24 1/4 cents higher on Friday, while gaining 57 3/4 cents during the week, achieving its highest weekly close during the life of the contract at $10.82 1/4 per bushel. This is the first weekly gain seen in three weeks, while as seen on the attached weekly chart, the contract has only the $11.05 3/4 contract high left to test, which was reached on March 8. While not shown, the continuous December contract shows this to be the highest December trade since March 2008.

Despite the growing importance of the spring crop, the weekly range of trade for the December contract has fallen for a third consecutive week to 54 1/2 cents, which signals lower volatility when compared to the $1.31 3/4 range traded three weeks ago and the four-week average of a $1.07/bu range. After closing near the middle of the weekly range during each of the past two weeks, this week's close was just 3 1/4 cents below the weekly high.

The first study shows the Dec22/March23 futures spread closing at 6 1/4 cents, (December above the March contract), down from recent highs, although the five-year average is minus 9 cents and the 10-year average is minus 9.6 cents. This spread has not been reported as a bullish inverse on this date since the 2008-09 crop year.

The middle study shows that stochastic momentum indicators on the weekly chart are trending higher, while have yet to reach overbought territory, indicating that a further move higher is possible.

The histogram on the lower study shows the noncommercial net-long position for spring wheat, which fell for the first time in six weeks in the week ending March 22. This position is reported at 21,728 contracts, while remaining well below the 29,470 all-time high reached as of Nov. 1.

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