Quality spring wheat will reap premium

Poor weather may see winter wheat end up as feed and millers scrambling to find quality spring wheat

It’s a nice time to be farming in the spring wheat zone.

Not only does that type of wheat demand its usual few cents spread to hard and soft winter wheats, but it’s building up a nice premium as low quality wheat floods the world.

“It’s all pushed (the world wheat market) towards quality,” Mike Krueger of the Money Farm in Fargo, North Dakota, said about the strength of spring wheat prices versus hard red winter and soft red winter.

As well, analysts say farmers should watch to see if quality and protein premiums become more pronounced as they start harvest. This year could see a rewarding premium market if quality and protein are in short supply.

“You’re going to have interest in ownership (of high quality and high protein wheat) because they’re going to be worried about what the depth of the supply is,” said analyst Neil Townsend of FarmLink Marketing.

“For run-of-the-mill, generic (winter) wheat, there isn’t much upside.”

Indeed, every week seems to bring more news of crop challenges around the world increasing the supplies of low quality wheat that undercuts its values.

German and Polish wheat crops have suffered bad weather, reducing their supplies of quality wheat and pushing some into feed and lower quality uses.

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The U.S. winter wheat crops were low protein and a challenge for millers.

Canada has low ending stocks of 2015-16 wheat, and its current crop has been hurt by wet weather after earlier looking terrific.

Millers are reaching for quality spring wheat and backing away from winter wheat, which creates a healthy premium between the winters and spring. New crop spring wheat futures in Minneapolis are now more than 70 cents per bushel over winter wheat contracts.

That spread is less likely to decline than grow, said Rich Nelson of Allendale, Inc.

“I think we’ll see this gain hold and continue (to grow) in the next few weeks,” said Nelson.

It makes spring wheat a generally more valuable crop to have this year, which should be good for those who have it in their bins this fall.

“It’s very clear the wheat market is a two-tier market,” said Townsend.

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“The bottom tier … has humongous supply.”

A significant amount of U.S. winter wheat will end up in the feed market, and it is being priced as feed, analysts said.

Elevator spreads are only beginning to be seen because most western Canadian and North Dakota crops are just beginning to be harvested, but there are signs that high protein and good quality wheat is beginning to draw higher prices.

Townsend said he’s heard of elevator prices in specific locations that have spiked 75 cents per bushel for very high protein wheat, up to $6.75 per bu.

He’s also heard that each tenth of a percentage of protein above 13 percent has been bringing more than three cents per bushel extra, which is more than the usual premium.

Kostal said the premium situation will take some time to settle.

“Protein premiums will cement once anecdotal results from combines roll,” he said.

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