In an unusual development, Chicago soft red winter wheat futures are priced higher than Kansas City hard red winter wheat.
U.S. Wheat Associates, the export market development organization for the U.S. wheat industry, notes that over the past 15 years hard red winter wheat, which has stronger protein and gluten, on average, has had a 35-cent per bushel premium over soft red winter wheat.
But, as of Aug. 17 this year, nearby September Chicago was trading at about US$5 a bushel, an 18-cent premium over Kansas. The Chicago premium for new crop December was less pronounced at 3.25 cents. Minneapolis hard spring wheat still led the market, as it normally does, with the December contract trading around $5.27 a bushel.
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The main reason for the relative strength of the Chicago market is that the soft wheat growing region in the Midwest was deluged with rain just as the crop was about ready for harvest.
The crop would likely have been smaller anyway because seeded area was down seven percent from the five-year average.
With the weather problems USDA has pegged this year’s soft-crop production to be almost 15 percent less than the 2014-15 crop.
Quality is down because of the rain and the disease and harvest delays it caused.
U.S. Wheat Associates said that as of Aug. 7, the cumulative test weight average was 57.2 pounds per bushel, almost 1 lb. per bu. lower than in 2014.
Protein was 9.9 percent at 12 percent moisture and 1,000 kernel weight was 32 grams, similar to 2014-15.
But U.S. Wheat Associates argues that part of the relative strength in soft wheat is also due to a changing demand trend.
The globe’s growing middleclass wants variety in its wheat-based products, including pastries, cakes and crackers. Soft wheat, red or white, with its low protein and weaker gluten is well suited to production of these products.
Euromonitor, an international market research firm, reports that pastry and cake consumption is growing at a rate of about three percent per year.
Western Canadian farmers do not grow a lot of soft wheat. Last year the region produced 1.2 million tonnes.
The Alberta Wheat Commission’s weekly price report shows that soft white spring wheat in the province is selling around $198 a tonne, $5-$6 a tonne more than Prairie Spring red wheat, but still about $25 less than hard red spring wheat.
While the low protein segment might have some growth opportunities, a good part of the wheat market wants strong protein and there might be less available in the U.S. this year. This might create an opportunity for Western Canadian hard red spring wheat, if we get good harvest weather.
U.S. Wheat Associate’s wheat quality sampling report said with 398 samples in, of an expected 530, the average protein content of the hard red winter crop is 12.3 percent, down from 13.3 percent in the 2014 crop. That is based on 12 percent moisture.
The spring wheat crop has not been sampled for quality yet, but North Dakota is expected to enjoy high yields and that tends to correlate with weaker protein.
