Minneapolis spring wheat futures have lost all of their normal premiums over Kansas City hard red winter wheat futures, as divergent fundamental factors work on the two classes of wheat.
However, it’s only a matter of time before spring wheat regains its ground relative to the Kansas City winter wheat.
The December Kansas City hard red winter wheat contract (now traded in Chicago) actually settled slightly above the equivalent MGEX contract on Thursday. The December Kansas City contract finished the day at US$7.2725 per bushel, which compares to the December Minneapolis contract at US$7.245 per bushel.
Typically, the Minneapolis futures would see a 20 cent per bushel or more premium over the Kansas City futures. Over the past three months, that spread has been as wide as 70 cents per bushel in the beginning of July.
Minneapolis spring wheat should eventually start to gain ground over Kansas City, but the hard red winter wheat is holding ground for now as that market works to buy acres, said Randy Martinson of Progressive Ag in Fargo, N.D.
He said the quality differential between the two wheats was also lacking this year, with the hard red winter wheat crop seeing good quality, while the normally better quality spring wheat was “lacking” with lower average protein.
“One reason we’re seeing the two markets on par with each other is because they’re basically the same quality,” said Martinson, although he added that higher quality/protein spring wheat was still seeing decent premiums in the cash market.
Once the U.S. winter wheat crop is planted and there is no longer a need to buy acres, Martinson expected to see the Kansas City contracts drift lower, while Minneapolis will hold steady or gain ground.
Solid export demand for U.S. hard red winter wheat was also supporting that market recently, but the fact spring wheat is now priced the same is causing more spring wheat to enter the export market as well, said Martinson.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.