Canada Markets

Prairie harvest conditions clearly led to a situation of declining wheat quality on the prairies as harvest progressed, but this has failed to show to a large degree in the Canadian Grain Commission's quality data as of Oct. 20.

Updated wheat quality analysis from the CGC shows that wheat quality has slipped as we get further into harvest, as expected, although the samples received to-date remain largely in the top-two grades and mean protein levels have changed very little.

Of the 3,130 samples tested as of Oct. 20 from across the prairies, 1,383 samples graded 1 CWRS (44.1%), 1,077 samples graded 2 CWRS (34.4%), 455 samples graded 3 CWRS (14.5%) and 215 samples graded Canada Feed (7%). As of recent data, 78.6% of the samples are falling within the top two grades, which is down from 91% reported as a 1 CWRS or 2 CWRS as of the September 29 report.

Mean protein content for both 1 CWRS and 2 CWRS remains unchanged at 14.1% across Western Canada, with a tight range from Alberta and British Columbia's 13.9% to a high of 14.3% in Saskatchewan.

So far, results are much better than seen in 2014, with the CGC's sample program of 4,893 samples showing nearly 51% in the top two grades while the mean protein for 1 CWRS was reported at 13.2% and 13.3% for 2 CWRS.

It is important to note that the report does not represent an equal distribution of samples across grades and areas of the prairies, while the results do not represent grain harvested in the past two weeks. Results can be expected to deteriorate further.

The bad news is that protein premiums are weak given the high protein achieved in the early harvest. Today's pdqinfo.ca indicates an average of $2.19/mt or $.06/bu premium given a move from 13.5% protein to 14%, with nothing quoted of higher proteins.

One proxy for protein is the relationship or spread between the higher protein Minneapolis hard red spring wheat contract and the lower-protein Kansas City hard red winter contract. The December contract spread closed at 31 1/4 cents/bu today (HRS above HRW), while has traded sideways since mid-April in a 20 cent range between 18 3/4 cents and 38 3/4 cents with no sense of urgency. Over the past five crop years from 2010/11 through 2014/15 (August 1-July 31), the average of the mean crop-year spread utilizing the continuous contracts is close to 45 cents/bu. Using this logic, a breakout above 38 cents on the December HRS/HRW spread could suggest increased interest in protein.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(CZ)

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