Farmers planning to use the Canadian Wheat Board’s Basis Price Contract for hard red spring wheat should look at it now, says Charlie Pearson of Alberta Agriculture.
The premium to the underlying futures contract price is better than it has been for a number of years.
“Basis levels are stronger than they have been, and then you still have the option to lock in the futures side later,” Pearson said.
The BPC allows farmers to go beyond the flat price of the Fixed Price Contract (FPC) and play more with the futures market and the relationship of CWB wheat classes. The basis in the BPC is the difference between the price of the FPC and the underlying futures market.
Read Also
Bond market seen as crop price threat
A grain market analyst believes the bond market is about to collapse and that could drive down commodity values.
Pearson said the hard red spring wheat BPC basis on the underlying Minneapolis wheat market was recently $11 per tonne over, compared to $12 under a year ago.
Compared to the Pool Return Outlook price of $236 per tonne for No.1 Canada Western Red Spring with 13.5 percent protein, the combination of BPC basis and futures has not looked so good at around $220.
However, the basis component is better than it has often been, so a farmer bullish on wheat prices a few months from now might want to consider locking in this basis and waiting for the futures to move.
Then, if the futures price rises, the locked-in positive basis could provide a healthy return.
Pearson said he is optimistic about wheat prices because they have already incorporated a lot of bad news.
“I don’t think from what we know today that there’s a lot of downside to prices.”
