Canada Markets

December Hard Red Spring Wheat Rebounds

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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After reaching a contract low of $7.80 1/2/bu, a reversal on May 3 led to three consecutive higher moves to test the 50% retracement of the move from the April high to May low at $8.45 1/4/bu. The second study shows the Dec/March spread narrowing to minus 5 1/4 cents. While not shown on the lower study, noncommercial traders increased their bearish net-short position in spring wheat futures to the largest held since Sept. 2020. (DTN ProphetX chart)

December hard red spring wheat reached a fresh contract low of $7.80 1/2/bushel on May 3, a price that was $1.29 1/2/bu below the recent April 3 high of $9.10/bu. After printing a bullish outside reversal bar on May 3, trading both lower and higher than the range from the previous session on the daily chart (not shown), price has since rallied to a high of $8.49/bu, testing the 50% retracement of the move from the April high to May low at $8.45 1/4/bu.

Today's close at $8.44/bu is up 21 3/4 cents for a third consecutive higher close, the first three-day stretch of higher closes seen since March 28. Over the week, the July contract gained 29 1/4 cents for its first weekly gain in three weeks.

Stochastic momentum indicators on the first study show momentum struggling for direction in recent weeks, with indicators poised to cross and turn higher on the weekly chart.

The brown line on the second study shows the Dec 23/March 24 contract spread, which strengthened 3 cents this week to minus 5 1/4 cents. One year ago, the Dec 22/March 23 spread traded at a 4-cent inverse, while the five-year average for this spread on this date is minus 7 1/4 cents. This spread traded as an inverse (Dec over March) only once in the past five years on this date.

Due to the timing of this week's CFTC data release, the histogram on the lower study fails to show the May 2 data which shows noncommercial traders increasing their bearish net-short position to 5,142 contracts, the first net-short seen in six weeks while the largest bearish position seen since August 31, 2020.

Since November 2022, noncommercial traders have moved from a bullish net-long to a bearish net-short three times but have so far failed to commit to trading this market from the short side. Late-week noncommercial short covering once again points to the struggle faced by the speculative trade which should be obvious when the CFTC releases May 9 data on May 12.

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