Over the past week, the December Minneapolis spring wheat future gained just 2 cents/bushel or $0.74/metric ton, although when viewed in Canadian dollar terms, the future fell by $0.77/mt due to the 51 basis point strengthening seen in the Canadian dollar against the USD.
Despite weakness in futures in Canadian dollar terms, pdqinfo's cash bids across the nine regions of the Prairies monitored increased from $0.89/mt in eastern Manitoba to $7.66/mt in northeast Saskatchewan, while averaging $4.86/mt higher to a price range from a low of $222.40/mt in western Manitoba to a high of $242.69/mt in northern Alberta.
Looking at DTN's strategies, two things jump out that may support a move higher. Spring wheat's seasonal influence may be at play, with the five-year trend showing that prices tend to peak in late-May and reach a low in late-September, in conjunction with the end of harvest. As well, last week's December contract close of $5.31 3/4/bushel (bu) is at the 18th percentile of the five-year range. Spring wheat is inexpensive relative to its five-year range based on movements of the front-month contract. This comes at a time when the most actively-traded Chicago soft red winter wheat's weekly close was at the 92nd percentile of its five-year range, after gaining 29 cents last week, with spill-over trade also a source of strength for spring wheat.
As seen on the attached chart for cash spring wheat prices for the northern Alberta region, one of nine regions reported by pdqinfo.ca, price closed at $242.69/mt on Oct. 2, the highest of the nine regions reported across the Prairies. Just two days earlier, this price reached a short-term high of $243.79/mt which represents the highest average bid reported since July 17, a fresh high for the crop year (since Aug. 1) while during harvest.
Since reaching the recent Aug. 12 low, the December MGEX contract has gained $13.08/mt in Canadian dollar terms, while the cash bid for this region has gained $22.38/mt over harvest, reflecting strengthening basis over this period. The attached chart shows the Oct. 2 basis at $17.28/mt CAD under the December contract, while also nearing a test of the strongest basis seen since late July.
Current price data may be correlated with the current export program that shows wheat exports (excluding durum) up 31.3% from last year over the first eight weeks of the crop year, while 29.3% above the five-year average and all at a time when the USDA is forecasting record stocks for the global balance sheet in 2020-21. This bears watching.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
© (c) Copyright 2020 DTN, LLC. All rights reserved.