The first weekly Crop Progress report released for 2016 in the United States showed the winter wheat crop rated at 59% Good to Excellent, well-above last year's 44% Good to Excellent rating and the five-year average of 41.6% for the first report of the calendar year. It was also above expectations, given the potential for frost damage, as well as the potential for negative impacts from the ongoing hot and dry weather across areas of the Southern Plains.
Despite the weather challenges faced, Kansas City HRW has led the move to the downside, closing 6% or 29 cents/bu below its recent March 15 high of $4.90 1/2 today. The MGEX HRS contract has fallen 3% or 15 3/4 cents from its recent April 1 high. While the stochastic momentum indicators for both old-crop charts reflect a short-term downtrend, HRS seems to be moving lower with greater reluctance.
Today's 12 1/4 cent move lower for May HRW took the contract price well-below the 50-day moving average, while reaching the contract's lowest level in more than a month. May HRS on the other hand, which saw price dip 8 1/4 cents, did gap lower in overnight trade although overall trade remains consolidated within last week's range while today's close was only marginally below the contract's 20-day moving average found at $5.17 1/4.
The lower study on the attached chart indicates the continuous HRS/HRW spread, which can act as a proxy for the demand for higher protein spring wheat versus the lower protein winter wheat. Today's close of 55 1/4 cents (May HRS over May HRW), is the highest this spread has traded since July 16 2013, after reaching a crop year low (August-through-July) of just 8 1/2 cents.
This same trend is also seen in new-crop futures, with the Dec HRS/Dec HRW spread trading at 40 3/4 cents, after recovering from a March 2015 low of minus 11 cents (HRW over HRS).
ProphetX calculates the average continuous active HRS/HRW spread at 7.93 cents in 2014/15, minus 9.69 cents in 2013/14, 45.11 cents in 2012/13, $1.20/bu in 2011/12 and $32.17 cents in 2010/11. So far this crop year, this spread has averaged 31.4 cents.
Cliff Jamieson can be reached at email@example.com
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