Canada Markets

Prairie Spring Wheat Basis Stabilized

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Given the No. 1 CWRS cash price data reported on a weekly basis by Saskatchewan Agriculture, basis calculated against the continuous active MGEX spring wheat future has narrowed over the past year, while showing signs of stabilizing within a narrow $5.33/metric ton range since mid-October. (DTN graphic by Cliff Jamieson)

Saskatchewan Agriculture's weekly cash price data shows the No. 1 CWRS spring wheat basis stabilizing since mid-October, while strengthening over the past calendar year.

The continuous active spring wheat chart shows a drop from $6.19 3/4/bushel on Jan. 3 2018 to a level of $5.54/bu. on Jan. 2 2019, an overall drop of 65 3/4 cents USD. Over this period, DTN's National Spring Wheat Index fell from $5.98/bu. to $5.19/bu., or $.79/bu., with the National Average Basis weakening from 22 cents under the March to 35 cents under the March contract over this period.

Canadian producers were sheltered with a $.06, or 7.7%, drop in the Canadian dollar relative to its U.S. dollar counterpart. Over this period, the cash price reported by Saskatchewan Agriculture rose by $12.79/mt CAD or close to $.35/bu. On Jan. 3 2018, the Canadian dollar basis was reported at $47.74/mt under the March contract, as shown on the attached graphic, while ranging from $29.99/mt on Oct. 24 to a low of $25.10/mt on Dec. 26 and at $26.03/mt on Jan. 2.

Given Saskatchewan Agriculture data reported over the past four years, the $26.03/mt basis calculated on Jan. 2 2019 is the strongest seen on this day over this period. Demand remains strong with week 20 data showing exports 1.036 million metric tons ahead of last year as of Dec. 16, while week 21/22 data will be released on Jan. 24.

Opinions may vary and only time will tell, but U.S. producer groups are vocal over that country's absence in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Canada's exports of wheat to Japan are reported at a $6/mt USD advantage as of Jan. 1, while will move at a $14/mt USD advantage as of April 1. Upcoming months may shed light on the effects to Canada-Japan wheat trade, while as of November, cumulative exports were 6.3% lower than the year prior.

It is important to note that this price data is simply used to show the trend, a snapshot in time for one location, while price variability is almost a guarantee. One Twitter post on Thursday showed a range of bids for the same grade and protein level received across 12 locations (seven different companies) in the western Prairies at a distance ranging from 45 km to 250 km. Bids ranged from $248.39/mt ($6.76/bu.) to $273/mt ($7.43/bu.) Knowing who really wants or needs the grain is essential.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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