Canada Markets

As you can see from the accompanying chart -- and likely know by your sales tickets -- the market hasn't been interested in paying much of a premium price for the premium quality found in hard red spring wheat (MW) compared to the soft red winter wheat traded in Chicago (W) for quite some time. That looks like it may be about to change thanks to a shift out of other spring wheat acres into corn in the U.S. Northern Plains this spring. And producers should be aware of the potential impact when working on marketing plans.

Even during times of large supplies, Minneapolis (hard red spring) wheat (MW) very seldomly falls below a 20 cents per bushel premium to Chicago wheat. On the other end of the spectrum, when MW is in tight supply, it tends to top out about $2.20 per bushel over Chicago wheat. That's quite a range to keep in mind with signs of life emerging thanks to the lowest U.S. other spring wheat planting intentions in 55 years.

It is worth noting that the Minneapolis Grain Exchange became a subsidiary of Miami International Holdings (MIAX) after the two companies merged in 2020. See more in DTN Cash Grains Analyst Mary Kennedy's post on the developments at: https://www.dtnpf.com/….

Part of the reason for the premium being so small recently was the three successive large annual production totals leading up to this spring. Even with improving export interest, ending stocks have grown to 223 million bushels (mb) for 2024-25 compared to the recent low of 142 mb in 2021-22 that ended in a MW-W premium of $2.795 per bushel. Production in 2021 totaled 297 mb thanks to a devastating drought in the region compared to 503 mb last year. With serious drought conditions existing in many of the Northern Plains production areas already, a stressed crop cannot be ruled out for this year. Combined with the low seeded area, markets will be very sensitive to such a development. And the first sign should show up on the MW-W spread.

As of Monday's USDA Crop Progress report, 30% of the spring wheat had been planted compared to 17% last year and a 21% five-year average. Drought conditions in South Dakota can take much of the credit with the state at 79% seeded compared to a five-year average of 44%. Also, highlighting the risks that lie ahead if widespread rain fails to develop. The current long-range forecast for the region from the National Weather Service (NWS) predicts normal to above normal temperatures with below to much below normal precipitation.

For what it's worth (due to the early survey date), Statistics Canada and Agriculture and Agri-Food Canada (AAFC) are looking for a slight increase in spring wheat area in Canada with similar production as last year on a return to more-normal yields. Given the NWS outlook for much below normal precipitation stretching up into the Canadian wheat belt, yields could be at risk here as well.

The rally in canola came just in time to (likely) maintain acres at the least for that crop while favorable prices for barley are likely enough to keep interest stable there too. With that, there is no reason to expect any seeding surprises as significant as what Mother Nature may have in store for the crop (regarding final production prospects).

This analysis does not change the previous discussion on the wheat-corn spread, but actually amplifies the significance of it. For more on that, see: https://www.dtnpf.com/…. Very briefly, when corn prices come within $.50 per bushel of Chicago wheat, feeding wheat becomes economical. Especially in quantities large enough to impact available supplies. Considering 5.750 billion bushels (bb) of corn are expected to be fed this year compared to only 120 million bushels of wheat, it doesn't take much of a substitution of wheat for corn in rations to have a dramatic impact on wheat supplies and ending stocks. July wheat fell to a premium of only $.48 per bushel to July corn on Monday's contract low close, suggesting bargain hunting should emerge. To highlight the reason for the interest from traders, as recently as May of last year the wheat-corn spread hit $2.53 per bushel. Quite an attractive risk/reward profile.

Looking briefly at the Minneapolis wheat market participants themselves, the managed-money trader group has been covering their short positions since the surprise planting intentions report with more of the same expected to come. As of March 31, they were close to a record net-short of 28,844 contracts, or 144 mb, but have since reduced that to 16,582 contracts net-short (83 mb) as of April 22. A widespread wheat market fund short-covering event could have significant market implications.

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I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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