Canada Markets

The latest CWB Pool Return Outlooks for 2014/15 mentioned weakening basis off the West Coast in their comment section. This trend is also seen in PNW wheat bids. Bids for No. 1 Dark Northern Spring wheat 14% protein delivered Portland were reported at $2.60 to $3.25 per bushel over the nearby May futures on April 1, with the most activity at $3.10/bu over. By May 1, this bid was reported at $1.75 to $2.40/bu over the May, with most trades at $2.15/bu over. The June 1 bid was reported to range from $1.75 to $2.20 over the July, with most trades at $1.98/bu over, as reported in daily USDA reports.

Despite weakness on the West Coast, cash basis on the Prairies has recently narrowed. The average prairie-wide cash basis was calculated at $.21 under the July future on May 1, while it was calculated at $.23 over the July on June 1, based on available internet bids. During this time, producers on the Prairies have benefit from a weakening Canadian dollar, with Canadian dollar trade falling just short of $.84 CAD/USD on several occasions in May, while closing below $.80 on June 1 at $.7981 CAD/USD.

Wheat deliveries on the Prairies are starting to recover as spring seeding comes to completion, with week 42 deliveries of wheat reported at 414,500 metric tons by the CGC, a four-week high. Space in the system remains ample, with week 42 prairie stocks of all grains reported at 2.386 million tons, approximately 58% of Prairies' working capacity.

Export indications for No. 1 CWRS 13.5% protein off of the West Coast, as reported by Agriculture and Agri-Food Canada, were reported at $308.82/mt as of May 22, the third consecutive weekly gain and the highest level reported in six weeks after reaching a $289.01/mt low as of May 1.

A number of factors suggest basis levels would continue to narrow. The impact of both frost and a lack of moisture over a large area of the Prairies could have a bearing on marketing decisions, with producers taking a wait-and-see approach. With last Friday's weekly close on the July contract already in the lower 2% of the range traded over the last five years, one wouldn't think that significant downside would lie ahead, although DTN's Five-Year Seasonal Index indicates that hard red spring wheat tends to trend lower over the next five weeks. Last of all is the potential for Canadian dollar weakness. Canada's economy continues to sputter with the negative impacts of the weak energy markets exceeding expectations, with some of Canada's banks continuing to hold on to forecasts which involve a dip to the $.75 to $.78/mt level.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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