Canada Markets

A Look at the Continuous December Spring Wheat Chart

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart represents the continuous December MGEX spring wheat contract. Down from a December high of $6.16 1/2/ per bushel, the December 2019 contract is grinding towards a test of 2019 lows. Nearby support lies at $5.88 1/4 per bu., the 50% retracement of the move from the September low to the December high, while trendline support lies at $5.73 1/2 per bu. The December 2019 over the March 2020 future spread (lower study) has narrowed 2 cents since a low of minus 10 1/2 cents was reached on December. (DTN ProphetX chart)

Since Aug. 21 2018, the continuous December MGEX spring wheat chart has traded within a 56 1/4 cents per bushel trading range, ranging from a low of $5.60 1/4 per bu. on Sept. 13 to a high of $6.16 1/2 per bu. on Dec. 17. Thursday's close of $5.89 1/4/ per bu. places the current price near support of the 50% retracement of this uptrend, calculated at $5.88 1/4 per bu.

A breach of this level could lead to a test of the 61.8% retracement of this same uptrend at $5.81 3/4 per bu., while further support lies below from upward-sloping trendline support found at $5.73 1/2. A monthly version of this chart would point to longer-term support from monthly lows in the $5.42 to $5.44/bu. range.

As of Jan. 15 CFTC data, delayed due to the recent U.S. government shutdown, investors continue to hold close to the largest net-short futures position seen on record, although this bearish position has been pared in the two most recent weeks reported. Meanwhile, as seen in the lower study of the chart, the December 2019 over the March 2020 futures spread has narrowed to minus 8 1/2 cents, a spread that has trended to narrower levels since reaching minus 10 1/2 cents on Dec. 31, a sign of supportive commercial activity.

While not shown, a sign of support is seen in the Dec HRS/Dec HRW spread, a proxy for the demand for higher protein wheat. This spread reached a recent low of 36 3/4 cents on Dec. 28 while closing at 63 cents on Feb. 14 (HRS above HRW), within 1 1/4 cent from a test of the high reached over the lives of these contracts reached in late November.

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DTN 360 Poll Results

In a recent poll, readers were asked if they think Canada's ag exports will be affected due to Canada's current diplomatic row with China. Eighty-six percent of respondents to this unscientific poll showed some degree of concerned, with 26% indicating that the industry could remain vulnerable for an expected period of time, while 60% felt that trade flows could be disrupted for the next short while.

The current poll asks your opinion of the latest Statistics Canada Dec. 31 grain stocks report. Please feel free to share your thoughts on this latest poll, found in the lower-right side of your DTN Home Page.

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