Portland Spring Wheat Basis Strengthens
An online comment made by a producer stating that a second padlock has been added to his bins of early harvested spring wheat perhaps captures the sentiment of producers on both sides of the border struggling to take this crop off.
The December MGEX monthly chart shows a gain of 47 3/4 cents over the month of September, the largest monthly gain over the life of the contract, while printing a bullish outside reversal on the long-term monthly chart, trading both lower and higher than the range traded in August.
Another signal watched is the spread between DTN's National Spring Wheat Index and National Hard Red Winter Wheat Index, which acts as a proxy for the demand of higher-quality wheat. This spread has been in an uptrend since Aug. 13, 2018, while the weekly spread chart shows a high for the week of Sept. 23 of $1.23 per bushel (bu) USD, the highest spread seen since April 2018, although has slipped back to $1.13/bu in the first two days of this week.
Another signal that bears watching is the track Portland basis levels reported by USDA on a daily basis. The attached graphic shows the upper end of the reported range since Aug. 1, or the start of Canada's 2019-20 crop year. While this range of basis has shown gradual strength for all protein levels reported since mid- to late-August, there has been a sudden increase of 25 cents USD in recent days.
Following this move, No. 1 Dark Northern Spring, minimum 300 falling number at 13% protein has ranged as high $1.04/bushel USD over the December contract, while 16% protein ranges as high as $1.36/bu over the December. This move shows basis levels retracing to levels last seen in the spring of 2019.
Spreads between the reported protein levels have remained constant over the period shown since Aug. 1, with a 16 cent spread from 13% to 14% protein, an 8 cent spread from 14% to 15% and an additional 8 cent spread from 15% to 16%. This too bears watching.
Cliff Jamieson can be reached at email@example.com
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