Demand for quality is pushing up hard red spring prices

Look for ‘basis specials’ when grain buyers need to blend better-quality wheat to meet sale specifications

Despite generally low wheat prices, the hard red spring wheat market is showing some positive price action, says a provincial crop market analyst.

“At least two things are happening in this market,” said Neil Blue. “Back in August, some commercial buyers began to increase their bids for wheat protein. This was a reflection of the high-yielding, but lower-protein U.S. hard red winter wheat crop, much of which was downgraded by rains during its harvest.”

A more recent development is higher-quality wheat futures prices gaining on lower-quality wheat futures prices.

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“The December Minneapolis wheat futures — which our hard red spring wheat most closely resembles — has been rising lately from a low of US$4.80/bushel on Aug. 31 up to US$5.25/bushel now,” Blue said earlier this month.

“Meanwhile, the December U.S. hard winter wheat futures, representing a lower-quality wheat, has struggled to move up only eight cents a bushel over that same time.”

Price spreads in the Minneapolis futures months have also strengthened.

“A few weeks ago, this market was in a strong carrying charge situation, with succeeding futures months at strong premiums, and implying ample supplies. Now, the December futures is the same price as for March futures, implying at least near-term demand.”

This change definitely reflects the effects of wet weather on the wheat harvest, but it also implies that commercial wheat buyers are trying to secure supplies of higher-quality wheat to meet sales being made. Higher-quality wheat is in relatively short supply this year, and the weak Canadian dollar continues to be a supportive price factor.

Blue recommends producers shop around for the best prices, and consider metering out some wheat into the market going forward.

“If Canadian export sales of higher-quality wheats are being made, this may translate into some so-called ‘basis specials’ to take advantage of. There is an abundance of lower-quality wheat, so this may present an opportunity to blend off some of that wheat inventory with their higher-quality wheat.”

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