CNS Canada — Minneapolis spring wheat futures are pulling away from their winter wheat counterparts, as quality issues with the North American spring wheat crop bring in protein premiums, according to an analyst who said there was more room to the upside in spring wheat.
Kansas City and Chicago winter wheat contracts hit 10-year lows in September, and continue to hover just above those lows.
However, the demand for higher-quality and higher-protein wheat was helping the Minneapolis futures distance themselves from the winter wheat contracts, said market analyst Bryan Strommen, of Progressive Ag at Fargo, N.D.
The U.S. winter wheat crop was large in terms of bushels, “but was disappointing, quality-wise,” he said.
Tight U.S. spring wheat supplies, together with concerns over harvest delays and quality issues with the Canadian crop were also supporting the U.S. futures.
The Minneapolis (MGEX) December contract was sitting roughly $5.22 per bushel at midday Tuesday, up by roughly 40 cents over the past month (all figures US$).
Meanwhile, the K.C. December contract, at $4.06 per bushel, was only 10 cents off its lows. As a result, the spread between the two has widened out to over $1.
While the spread between Minneapolis and K.C. wheat is getting large, Strommen noted the two contracts were over $6 apart at one point in 2008.
Movement in the futures was not yet being seen as explicitly at the grain elevator level, he said, but he expected the lack of high-quality wheat supplies would become more of an issue going forward as harvest results become more widely available.
From a chart perspective, the December MGEX spring wheat contract is trading right below its mid-August high of $5.30 per bushel. A break above that “opens the topside up,” with the next resistance coming in at $5.60, then again at $5.80, said Strommen.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.