A quick survey of readily available basis levels across the Canadian Prairies have shown an average basis level of $1.03/bu. or $38 per metric tonne under the March future for December-delivery of 13.5% protein HRS wheat. This is somewhat wider than early November when the calculated level was 96 cents under the December, but remains significantly narrower than early October when levels were roughly $1.34 or 49.23 under the December.
While there is talk of grain being held from the market due to producer unwillingness to sell, crop-year to-date deliveries remain strong at 6.5% higher than 2011, as of week 17 data, and 15.9% ahead of the three-year average. Exports are, however, slowing, as evidenced with week 17 delivery data for 2012/13 being 6.5% behind 2011 and 4.5% behind the three-year average.
From the attached chart, we see that U.S. basis has narrowed from 82 cents on Aug. 1 to 63 cents on Nov 30. This is seen by the spread between the blue line, which is the Minneapolis future (continuous chart) as compared to the green line, which is the U.S. National Spring Wheat Index. As I've discussed in the past, this fall's basis has been running exceptionally wide, and has been comparable to the worst basis levels seen in the past five years.
The red line indicates the four-year average for the MGEX future, as compared to the black line which represents the four-year average of the National Spring Wheat Index. These two lines provide insight as to the seasonal tendency for futures and basis during the past four years. While the five-year seasonal chart (not shown) indicates a seasonal top for hard red spring wheat in February, the attached chart would indicate basis levels will continue to narrow as we move forward.
It is expected by many that international buyers will be forced to turn to North American supplies to make up for short crops elsewhere in the world, but this has failed to show up in export data to-date. Changes in basis levels will be one good indication that this is in fact happening.
Cliff Jamieson can be reached at email@example.com
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