Canada Markets

Two days does not make a market, although protein premiums for Dark Northern Spring wheat at Pacific Northwest terminals this week have shown signs of life for the first time in a long time, which may have implications for the Canadian West Coast trade.

As of Aug. 25, the six-state harvest progress for the U.S. spring wheat crop indicated that overall harvest activity was 42% complete, which ranges from 28% complete in North Dakota to 75% complete in South Dakota. While there are ongoing hints of lower protein levels in the crop, I see no official sample results posted as of this point in time.

PNW bids reflected very narrow spreads in the 2012/13 crop year (Canadian marketing year), with the average 13% to 14% protein spread at 19 cents/bushel. From Aug. 1 to Aug. 23, this situation remained unchanged, with the spread roughly 18 cents. There has been little interest in protein over 14%, as indicated by the absence of premium over and above the 14% level since August 1 2012.

As indicated on the attached chart, basis activity over the first 23 days of this month were typical of what we've seen over some time. On Aug. 26, basis levels were reported against the December future, as compared to the September basis the previous week. As well, basis levels reported indicated spreads that reflected a growing focus on protein levels.

For example, on Aug. 23, rail bids for DNS at PNW terminals indicated 13% PRO at 91 cents over the September contract, while 14% was at 108 more than the September, and 15% and 16% were both bid at 107.5 cents more than the September. Note that daily bids are arrived at by taking the mid-point of the day's basis range reported or utilizing the single basis on days that the USDA reports dominant trade at a particular level.

Monday's report indicated trade at 57 cents more than the December for 13% PRO, while 14% was bid at 105 more than the Dec, 15% at 144 more and 16% was bid at 158 more than the December.

As of the last report covering trade on Tuesday Aug 27, spreads widened even further, with 13% bid at 57 cents more than the Dec, while the premium for 14% protein was 48 cents ($17.64/mt), the premium for 15% PRO was an additional 28 cents ($10.29/mt) and 16% PRO was bid at an additional 25 cents ($9.19/mt). Note again that these reflect the mid-point of the ranges offered, with the actual range for 13% reported at 47 to 67 cents more, 14% at 95 to 115 more, 15% at 123 to 143 more and 16% protein indicated at 145 to 171 more.

The protein market bears watching as more protein data in both the U.S. and Canada becomes available. The next step is to see if this move has longevity and if and how country elevators react.

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

(ES)

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