The average prairie-wide basis, which is based on available Internet quotes, indicates basis levels are flat at $1.17 per bushel over the March for February and March, while $1.17/bu over the May for April delivery and $1.25 over the May for May delivery. Based on Monday's close, cash bids range from $6.03/bu or $221.57/mt to $6.17/bu or $226.71/mt over this period.
Since recording the strongest cash basis of the crop year on Jan. 18 of $1.46/bu over the March, basis has weakened at each look, while futures have also been on the defensive and threaten to test the Jan. 4 contract low at $4.82 1/4/bu on the nearby March contract.
Recent pressure on basis is linked to the recent move in the Canadian dollar, increasing 7.7% between Jan. 20 and Feb. 4, although the market failed to hold the eight-week high achieved and is currently showing signs of moving into a short-term downtrend.
At the end of week 26, or the mid-point of the crop year, Canada's licensed wheat exports are reported at 8.343 milling metric tons, approximately 2% higher than the previous year despite the challenging global market. Producers have supported the aggressive movement, with year-to-date producer deliveries 3% higher than year-ago volumes.
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While a bearish USDA report in the U.S. on Tuesday could weigh further on wheat futures, Canadian producers may find a firming basis help offset some of this weakness. Here's just a few reasons why:
1) Both crude oil and the Canadian dollar have struggled and are failing to hold above moving average support levels.
2) Commercial stocks are reported at 2.6025 mmt as of Jan. 31, close to 600,000 metric tons below the same date last year and 12% below the five-year average.
3) Should cash prices dip below $6/bu, producer deliveries may slow and further tighten stocks.
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Cliff Jamieson can be reached at email@example.com
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