Canada Markets

Prairie CWRS Basis Strengthening With Futures

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The average prairie CWRS basis has strengthened along with futures. The, blue line represents the spot basis, while the red line represents the forward October delivery basis, over the respective future. (DTN graphic by Scott R Kemper)

The intensifying drought conditions in the northern U.S. states and Canadian Prairies, combined with concerns that the looming rainfall shown on the seven-day National Weather Service charts could miss these areas and bring far less rainfall than shown on precipitation maps has led some in the industry to pause. They recall where they were in 2008 when spring wheat prices surpassed $20/bushel.

Buyers are showing growing interest for protein wheat given that prairie basis has strengthened along with futures. As seen on the attached chart, the spot CWRS basis (blue line), an index of values based on accessible internet bids, has strengthened over time and continues to strengthen along with futures, which reached contract highs in the July, September and December contracts on Thursday. Today's spot basis was calculated at $.98/bu. over the September future, which compares to $.94 over this time last year and the three-year average of $.19/bu. under the future. Bids for higher protein wheat are seen above the $7/bu. level.

October delivery has also shown signs of strengthening, calculated at $.89/bu. over the December, which compares to $.69/bu. over this time last year and the three-year average of $.38/bu. under.

The weakening Canadian dollar has contributed towards strengthening basis over the selected time period seen on the attached chart by weakening 3.5% over the period. At the same time, September wheat has rallied from a May 16 low, over which time the Canadian dollar has strengthened over 40 basis points.

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

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(ES)

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