Cash Market Moves

Hard red spring wheat -- the preferred wheat for baking -- earned high marks in 2015. But with protein premium spreads quite narrow, those high numbers may not lead to higher prices for producers.

The North Dakota Wheat Commission recently issued a report on HRS quality, saying that in 2015 the crop "produced high grades, high protein and is sound in overall kernel traits."

Average ranking of the crop was #1 dark northern spring, compared to #1 northern spring in 2014. NDWC said DNS has significant improvements in color and vitreous color than NS. "Specifically, the crop averages a 61.6-pound-per-bushel (81 kg/hl) test weight, 0.4% damage and 83% vitreous kernels," NDWC stated. "Vitreous kernels are vastly improved over the historically low 53% recorded in 2014.

"Average protein is 14.1%, up from 13.6% in 2014 and similar to the five-year average. All parts of the region show higher kernel protein levels. Nearly two-thirds of the 2015 crop is above 14% protein (12% moisture basis), compared to just 40% in 2014. Likewise, only 12% of the crop falls below 13% protein, compared to nearly 30% last year."

HIGH PROTEIN DOESN'T NECESSARILY MEAN HIGH PRICES

Tim Dufault, a spring wheat farmer in Crookston, Minnesota, told DTN in early September: "As usual, I have protein, but it's not worth anything." This was in response to a conversation about how narrow the protein premiums had become compared to 2014. During the end of the first half of September this year, 13% protein was at +60 to +70 over the Minneapolis December, 14% was at +80 to +90 and 15% was at +140 to +175. In contrast, just one year prior at the same time, 13% protein was at +85 to +140, 14% protein was at +250 to +600 and 15% protein was at +605 to +650.

Protein premium spreads continue to remain narrow; the Minneapolis spot basis on Oct. 22 showed no 13% proteins for sale, 13.5% was at +105 to +140, 14% was at +115 to + 130 and 15% was at +180 to +200. In contrast to the same day one year ago, 13.5% was +150 to +195, 14% was at +225 to +250 and 15% was at +500 to +550.

Dan Maltby, consultant for the Risk Management Group in Minneapolis, Minnesota, told DTN, "The spring wheat basis often reflects the overall protein content of the crop, which is almost always determined by weather, and a key factor is night-time temperatures during wheat filling stages. This year, the crop experienced warm nights, and thus the protein content of the 2015 crop was higher."

The NDWC also mentioned the protein-boosting effects of the weather. "A warmer, drier finish to the growing season favored the higher protein average," NDWC's report stated. "An extended period of warm, dry conditions supported the harvest of a sounder, drier crop compared to 2014."

Malty said with the higher proteins "... one would expect the basis on 15% proteins to drop, relative to 14%, which it did."

He continued, "This year, so far, there has been a stunning collapse of protein premiums. Fifteen percent proteins are averaging much lower, at +175 and while this will probably increase, maybe approach +200, 15 proteins certainly will be down more than $2.50 per bushel. This is directly a result of this crop averaging almost a full point higher than last year."

Maltby talked about export demand, stating that 14% proteins, not 15% proteins, are exported. "However, if 14s are tight supply, then 15s and 13s can be blended together to make 14s. But in years when 14s are plentiful, 15s will only be used for specialty milling end uses and generally, demand for these products does not fluctuate greatly."

Maltby pointed out in the accompanying chart that the 15% protein average posted high side milling basis from 2005/06 to 2014/15 was +230 and the average 14% protein basis in the same period was +140. He said, "Fifteens averaged a 90-cent premium in those 10 years and currently 15s are quoted at a 70-cent premium to 14s, so in my opinion, they are historically a bit of a relative bargain."

MORE FROM NDWC

Kernel moisture is about one-half percentage point lower, and the average falling number for the overall crop is 372 seconds, up from 339 seconds in 2014. Distribution of falling number better reflects the improved crop soundness, as 94% of the crop averages above 350 seconds compared to just 73% in 2014.

In 2015, spring wheat planting began in early April, which was well ahead of 2014 planting pace and the five-year average. "Emergence was a bit slow to start due to cool, dry conditions in late May and early June," said the NDWC. "As temperatures warmed up, emergence took off at an above-average pace. Growing season conditions were more favorable than last year with lower disease pressure. "Overall yields were above average, but varied from record yields in the eastern half of the region to below-average yields in the west where much drier conditions prevailed throughout the growing season."

"Regional production is up slightly from 2014, but a larger share in 2015 was produced in the eastern half of the region due to higher planted acres and record per-acre/hectare yields. Production was lower across the western half due to less planted area and reduced yields due to minor to severe midsummer drought conditions."

Hard red spring wheat is one of the six classes of wheat grown in the U.S., primarily in the Northern Plains. The high protein content and superior gluten quality of this specialty wheat makes it the "aristocrat of wheat" for use in some of the world's finest baked goods, according to the North Dakota Wheat Commission. All specialty breads such as bagels, hard rolls, hearth breads and even pizza crust taste better when spring wheat flour is used because they can be stored longer than breads made with low protein wheat, according to the NDWC. Adding hard red spring to lower-protein wheat improves dough handling and mixing characteristics as well as water absorption. The resulting flour can be used to make an assortment of bread products, as well as Chinese-type noodles.

The entire report can be found here: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/AG)

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