Canada Markets

There may be many reasons for new-crop sales of wheat off the combine in harvest time. Perhaps it's an issue of bin space, which is never a bad problem. Elevator space is another issue that must be watched more than ever. Deregulation of the grain markets in Western Canada will undoubtedly change the behavior of the line companies, affecting what moves and when. We may have gotten a glimpse of things to come last fall, although last year's trade patterns may have been distorted by the United States Midwest drought and its effect on world markets. Of course, there's also the need to move some product to meet fall cash flow needs.

If you are one of the fortunate ones whose crop is in the ground with favorable emergence, this may be a time to consider the sale of those first few bushels for fall delivery.

The attached chart indicates that on average, over the past five years, the nearby or front-month contract has declined approximately 14% from the end of May to late October, according to the five-year seasonal index. With the May 31 close of $8.20 per bushel on the nearby July future, this would suggest a move down to $7.06/bu. in October, which would ultimately be the low for the year.

One additional reason to lock in new-crop pricing is to capitalize on today's basis. Because this is the first year of the deregulated marketplace, producers have little history to go on in order to make judgments on basis. Last fall, my Prairie-wide average basis narrowed from $1.34/bu. to $.96 cents under the December contract over the course of the month of October. Currently this average basis for October delivery is 73 cents under the December, while ranging from 53 cents under to 84 cents under.

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

(AG)

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