Canada Markets

December Spring Wheat Breaks Out Higher

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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December hard red spring wheat broke out higher from a range traded over almost eight months. Today's gain saw price breach $9/bu, while closing above the 61.8% retracement of the move from the October high to the May low, calculated at $9.00 3/4/bu. The first study shows the Dec/March spread at minus 4 1/4 cents, stronger than normal for this week. The lower study shows a noncommercial net-long position held for a third consecutive week. (DTN ProphetX chart)

Global grain markets received a boost on July 19 on reports of Russia's strikes on export facilities in Ukraine, along with reports that Russia will be blockading Black Sea traffic. Front-month contracts in Chicago soft red winter wheat tagged their respective 60-cent daily limit on Tuesday while closing near this limit.

December MGEX hard red spring wheat settled 19 1/2 cents higher at $9.06/bushel (bu), while 19 cents below the session's high. This was a second higher close for this market that saw this contract reach its highest trade since Nov. 25, 2022. This was a convincing move, with daily volume in the December reported at 4,581 contracts, or 136% higher than the four-day moving average.

Today's move saw a breakout from a sideways trade that has governed trade since December, with trade struggling to sustain gains above $9/bu over this period. Today's move not only breached the $9 level for the first time since April 4 but also closed above this resistance. After trading both sides of the contract's 200-day moving average in each of the past three sessions, today's trade saw a bounce from the 200-day to close sharply higher.

As well, the July 19 close was above the 61.8% retracement of the move from the contract's October 10 high to May 3 low, calculated at $9.00 3/4/bu, while clearing a path for a continued move to the October high of $9.75/bu.

The first study shows the Dec/March futures spread that weakened 1/2 cent to minus 4 1/4 cents, after trading at a modest 3/4 cent carry on July 14. This remains significantly narrower than normal for this day over the past five years; this spread averaged minus 9.15 cents on this day, while traded as a bullish inverse on only one of the five years (2021) while the other four years ranged from minus 13 cents to minus 17.25 cents on this date.

The lower study shows the noncommercial net futures position, which grew to a bullish net-long of 6,437 contracts as of July 11. After turning net-short as of June 27, speculative traders have shown uncertainty, reducing their net-long over the week of July 3 while increasing the size of this position in the following week. The current net-long position is the largest held since October 2022.

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