Canada Markets

The average prairie-wide wheat basis, based on available Internet bids, has narrowed 17 cents per bushel so far this month to an average of $1.68/bu ($61.73/bu) under the September Minneapolis future, partially offsetting the 29 3/4 cent drop seen in the September future in the same period. This is the narrowest basis calculated since early December, but continues to indicate the challenges faced due to huge supplies remaining on the prairies.

This average cash basis represents an average cash price of $4.79/bu on the prairies, which may well be below the price objectives for many producers. Statements from industry participants over time have suggested that Canada's huge crop in 2013 combined with this winter's transportation issues will weigh on Canadian wheat markets through the 2014/15 crop year and perhaps longer.

As indicated on the attached graphic, cash basis in the United States as of Tuesday evening, based on the difference between the appropriate Minneapolis future and DTN's National Spring Wheat Index as indicated by the green line, is tracking below the average basis calculated over the past five years, after trading both above the best basis indicated in the past five years (red line) as well as below the weakest basis calculated over the past five years (purple line). At 28 cents under the September future, current basis is 8 cents below the average (blue line) basis calculated over the past five years.

Despite the weaker price structure in the Canadian market, year-to-date producer deliveries into the licensed system as of week 47, as reported by the Canadian Grain Commission, is 18.4398 mmt (excluding durum). This volume is 20.6% above the 15.295 mmt delivered by producers as of the same period in 2012/13, while 26% above the three-year average of cumulative producer deliveries as of week 47.

Looking forward, the prairie-wide basis widens slightly in the August and October delivery periods, while narrows only slightly in the January period, while wheat futures continue to struggle to find a bottom.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(AG)

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