Canada Markets

Hard Red Winter Wheat Leads Complex Higher

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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March Kansas City hard red winter futures closed higher for the fourth straight day on Wednesday with a 5 1/4cent gain, reaching its highest level traded in over four weeks and closing near the top of the session's trading range. Nearby resistance lies at $5.21 per bushel, while the second study shows momentum indicators nearing overbought territory that may act to slow speculative interests. The lower study shows the March/May spread narrowing 3 cents so far this month to minus 9 cents, a sign of bullish commercial activity. (DTN ProphetX graphic)

March hard red winter wheat has led the wheat complex higher in recent trade, closing higher for the fourth consecutive session on Wednesday, up 5 1/4 cents to $5.15/bushel. Wednesday's close was near the $5.15 1/2/bu high reached Wednesday, which was the highest trade seen on this contract in almost five weeks.

Reaching a four-week high is a bullish technical signal. Since the recent Jan. 15 low, March HRW has gained 4.6% to Wednesday's close, while the SRW contract has gained 3.5% and spring wheat has advanced 1.5%. Bloomberg reported that China may entertain buying 3-7 million metric tons of U.S. wheat, which has likely led to a combination of commercial and noncommercial buying interest.

Despite the uncertainty surrounding such statements, the lower study on the attached chart shows the March/May futures spread narrowing from minus 12 cents (May trading over the March) to minus 9 cents. This is a sign of supportive commercial activity and the narrowest spread seen since early August.

Cash markets are also showing signs of strength. As of Tuesday, the National Average Basis in the U.S. was reported at 25 cents under the March, which compares to the three-year average of 65 1/4 cents under. This strength is also seen in prairie cash markets. Saskatchewan Agriculture reports their weekly cash price at $220.36/mt for No. 1 Canada Prairie Spring Red wheat as of Jan. 16, while a quick look at cash bids on Wednesday shows CPS Red trading in the $230 to $240/mt range in one company's bids. Saskatchewan Agriculture does not show a weekly average this high in their weekly data that stretches back to April 2014.

Perhaps the risk is if the U.S. and China fail to come together to reach a trade deal, which could lead to a sudden change in direction as the speculative trade liquidates.

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

Follow him on Twitter @CliffJamieson

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