New-Crop Spring Wheat Slides Lower
Spring wheat prices for December 2023 delivery have fallen 42 3/4 cents over the past seven consecutive sessions, reaching a fresh contract low over each of the first three days of the current week. The March 1 close saw spring wheat prices diverge from winter wheat prices, with both old-crop and new-crop HRS prices closing lower while winter wheat achieved a higher close.
The December HRS contract closed 36 3/4 cents lower or 4.1% lower over the month of February for a fourth consecutive lower close seen on the monthly chart (not shown). The chart shows a bearish outside bar formed, with the February price trading both higher and lower than the range traded in January.
This weakness is seen despite concerns of dryness in parts of Europe and India, challenges faced across Ukraine's industry, dry conditions across the Canadian prairies and northern U.S. states and tight North American stocks. The USDA's February WASDE report points to U.S. HRS stocks for 2022-23 to reach the lowest level in 15 years, a level that is 46.2% below the five-year average. AAFC has reduced their estimate for Canada's wheat carryout (excluding durum) by 200,000 mt this month to 4 mmt, 11% below the five-year average. This would be the second-lowest stocks reached in 10 years.
The attached continuous December chart shows the nearby trade reaching its lowest level since January 2022, with potential support at $8.50/bu. Potential support also lies at $8.35 1/2/bu, which is the 61.8% retracement of the move from the 2019 low to the 2022 high.
The lower study shows the noncommercial futures position as reported by the CFTC, which is now three weeks behind due to technical issues faced by the CFTC. As of Jan. 31, the most recent available data, investors held a net-short position of just 49 contracts of MGEX spring wheat, which doesn't register on the chart. This signals a ninth consecutive week where speculators held a net-short position, with the most recent weeks indicating close to a neutral position held by this group.
While not shown, commercial traders held a net-short position in spring wheat futures of 404 contracts as of Jan. 31, the first net-short seen in nine weeks. Confidence is seen lacking on the part of commercial and noncommercial traders.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
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