Canada Markets

December HRS Struggles at Resistance

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The December HRS weekly chart shows prices struggling at resistance this week, with momentum turning sideways near oversold levels (second study). The third study shows a neutral but bearish outlook held by commercial traders, while the lower study shows the Dec HRS premium over HRW increase over the week. (DTN graphic by Anthony Greder)

The December MGEX hard red spring wheat weekly contract shows buyers having met their match at resistance over the past three weeks. Since reaching a daily low of $5.75 per bushel on Feb. 26, prices have rallied to the 38.2% retracement of the move from the December high to the February low at $6.21 1/4/bu.

This week marks the third consecutive week that the December price has stalled at this level. This week's trading bar could be viewed as a bearish key reversal, with this week's trading range trading both higher and lower than last week while posting a weekly close below that reported last week.

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The second study shows the stochastic momentum indicators having posting a bullish crossover the week of March 9, although this upward momentum has stalled this week and could result in a shift to lower momentum. Commercial traders continue to hold a neutral, but bearish view of new crop fundamentals, as indicated by the third study with the December/March carry remaining in a constant range while ending the week at minus 12 cents (March over the December).

December HRS gained in value relative to HRW from mid-December until early March, reaching a weekly high of 23 1/2 cents for the week of March 2. Since then, this spread has narrowed to a low of 9 1/4 cents in the week of March 30, but has rallied 5 cents this week to 14 1/4 cents. This spread points to the market's overall demand for the higher protein HRS relative to lower quality HRW supplies, or in other words, acts as a proxy for protein premiums in the market. Recent concerns of Southern Plains drought may have resulted in expectations for a higher-than-average protein found in this year's HRW crop, although there exists a list of growing challenges facing the U.S. winter wheat crop which may see HRS continue to strengthen in relation to red winter wheat.

Since early March, the average prairie-wide October delivery basis has strengthened from 7 cents under the December future to 17 cents over the December, although has since weakened to 5 cents over in today's trade. Today's average new-crop bid is roughly $6.09/bu. Statistics Canada will provide their first report on producer seeding intentions on April 23, while the wheat market will continue to search for a bullish story needed to see prices break higher.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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