Canada Markets

Despite the bearish tone across the wheat markets this week, hard red spring is showing signs of strength as seen in its futures spread as well as its performance relative to the other wheat futures. Interest in protein may be taking hold.

Over the course of the week, the July Chicago SRW wheat future lost 21 cents per bushel, the July Kansas HRW future lost 21 1/2 cents/bu., while the July Minneapolis HRS future lost just 5 cents.

A similar story is told in the December contract, where the December Chicago future fell 22 1/2 cents over the course of this week, the December HRW future fell 23 1/4 cents and the December Minneapolis contract settled only 11 3/4 cents/bu. lower.

While the Minneapolis future may be struggling, it is fighting to maintain a close over the $8/bu. psychological support level for the fifth week on the July contract, while the December has maintained a weekly close over $8/bu. for the past six weeks.

The spreads between futures months provide a glimpse of growing commercial bullishness. As seen on the attached chart, the July/September HRS contract spread gained 4 3/4 cents to close at 8 3/4 cents this week, surpassing its most recent high of 6 1/4 cents in April and reaching its highest level since the last week of November. This spread has rebounded off of a low of minus 2 3/4 cents in mid-February.

This strength is also seen in the Sept/Dec spread, which has gained 2 cents this week to reduce its carry to 5 1/2 cents (December trades 5 1/2 cents above the September). This spread has gained 5 cents since its minus 10 1/2-cent spread in early April.

Further out, the Dec/March spread lost 1/4 cent this week to end at minus 11 1/4 cents, although it has strengthened 3 1/4 cents from its minus 14 1/2-cent spread in the last week of March.

The lower study shows the spread between the December Minneapolis HRS future and the December Kansas City HRW future. New-crop HRS wheat has gained in relation to HRW since late-October/early November, when the premium for HRS relative to HRW reached a low of 8 1/4 cents. Today's close, at 39 1/4 cents, reflected an 11 1/2-cent gain over the course of this week and achieved the highest weekly close since Sept. 10 when the spread was 49 cents. The growing strength in this spread can be used as a proxy for interest in the high quality protein wheat as compared to the lower protein classes.

While it's difficult to say just what is behind this strength at present, delayed seeding in the northern States, specifically North Dakota where rainfall could reach up to 3 inches over the weekend, may be playing a role. Private forecaster Informa also released a forecast for 2013 spring wheat acres today which suggest a drop of 300,000 acres from the USDA's March prediction.

The action in these spreads may be one situation that bears watching.

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Have a great long weekend and best of luck with seeding operations!

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

(AG)

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