Canada Markets

Today's Globe and Mail featured an article titled "Buy, grow, sell high: Canada's wheat farmers turn into commodity traders". In this article, the newspaper explored the marketing challenges face by today's producers given the absence of the CWB as the sole wheat marketer in Western Canada and the need for producers to hone their own marketing skills.

One of the producers interviewed expressed concerns over his desire to receive a "fair" price, which can lead to a long debate over just what constitutes a fair price and what does not? One of the tools at a producer's disposal is the study of how bids are derived from location to location, perhaps even across borders.

In this morning's opening comments I noted that the average Prairie-wide basis for 1 CWRS 13.5% protein was 90 cents under the December MGEX future, which compares to the DTN National Average Basis of 39 cents, converted to Canadian dollars. The National Average Basis is calculated as the difference between the MGEX red spring future and the National Spring Wheat Index, obtained from several hundred spring wheat handlers in the northern United States which report prices to DTN on a daily basis.

The attached chart shows the trend of the average Prairie-wide basis over the past year (blue line), while the red line indicates the recent movements of the National Average Spring Wheat Basis, converted to Canadian dollars for comparison purposes. On Aug. 26, there was a one-cent difference between the two basis levels, with the National Average basis higher than the average Prairie basis at 54 cents under the December, as compared to 53 cents under on the Canadian Prairies.

Since that time, these two basis levels have diverged, with the Canadian basis widening to 90 cents under the December as of Sept. 16, while the National Average basis has narrowed to 39 cents under. While a portion of this difference can be explained by Canadian dollar strength over this period, from $.9516 CAD/USD to $.9689 CAD/USD, it does not explain it all. The difference of 51 cents or $18.74/mt needs to be placed front row and centre in all wheat marketing decisions.

This scenario is suggesting that producers consider looking south of the border for marketing opportunities (where possible) or hold until Canadian prices correct.

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

(ES)

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