Buyers are chasing hard red spring wheat.
“They’ve really come with a premium,” said North Dakota Wheat Commission market analyst Erica Olson about recent cash market bids for hard red spring wheat.
“Our basis level is really strong right now.”
Buyers are paying North Dakota farmers from 30 cents per bushel to $1.50 per bu. over futures prices to secure physical grain, she said. Usually cash market prices are below futures prices.
According to Reuters News Agency, commercial users of hard red spring wheat have been paying as much as $8 per bu. over Minneapolis Grain Exchange spring wheat futures for rail cars of quality spring wheat, to as high as $14.30 per bu., a price not seen since the 2008 rally.
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Top quality spring wheat can be blended with other types of wheat to bring up the overall quality of flour.
Continuing wet weather in the Dakotas has caused the wheat crop to be badly delayed, and wet soils and cold temperatures have retarded the Canadian crop’s seeding progress.
Since those are the two main growing regions for hard red spring wheat in North America, and North America is one of the biggest exporters of spring wheat in the world, the markets are paying attention.
“Weather concerns continue to highlight supply side risks at a time when inventories are low and market balances tight,” said Barclays Capital in its weekly commodities newsletter released May 20.
The Canadian Wheat Board’sProducer Payment Options Updater newsletter of May 18 agreed.
“The world is very much in a prolonged weather market,” it said.
“The continuing struggle to get the crop planted is casting a shadow on production potential.”
Bad weather is hurting crop prospects in many places, but high quality and protein wheat appear to be most greatly affected.
A substantial spread has broken out between hard red spring wheat and soft red winter wheat futures, with a more than 80 cent per bu. spread in spring wheat’s favour for new crop months.
Barclays says the continuing U.S. crop seeding delays, especially with spring wheat, are a reason to remain bullish.
“We believe the selloff in grains markets through the first half of May has been technically driven and not fundamentally warranted,” said the Barclays report.
“Despite the recent pick-up in U.S. plantings last week, these continue to lag five-year averages, most notably in the case of U.S. spring wheat.”
But the PPOUpdateris more cautious, citing the ability of crops to quickly rebound if conditions improve.
“There have been numerous historical instances where better than average conditions have compensated for slow planting…. Overall, it is safest at this juncture to not declare crops either made or killed,” stated theUpdater.
Production in wheat exporting countries Russia and Kazakhstan could begin pressing down prices.
“The truth is that the minute they return in earnest to export status the bull run will have a substantial amount of wind taken out of its sales,” said theUpdater.
“This is a scenario to be avoided and to bet against Russian production at this stage of the game is risky.”
SEEDING IS ALSO DELAYED IN NORTH DAKOTA. SEE PAGE 16.
