Canada Markets

John De Pape of FARMCo posted an important reminder today on social media circles of the significance of the wheat market trends through the next crop year which can help producers with new-crop selling decisions.

As noted on the attached graphic, the average basis level for spring wheat delivered in October is calculated at $1.72/bu. under the December, based on available internet bids. Basis levels then indicate a narrowing trend into the spring months, with January delivery calculated at $1.56/bu. under the March, March delivery at $1.45/bu. under the March and May delivery averaging $1.36/bu. under the May.

Another trend to watch is the spreads, which ultimately indicated the bearishness or bullishness of the market, as determined by commercial activity in the market. The Dec/May spread has been in a downtrend since September 2013, ending today's session at minus 22 1/2 cents, also referred to as a 22 1/2 cents carry, with the May trading at a premium to the December.

Based on this information, a decision made today to store new crop spring wheat into the May market as opposed to selling in October would capture this 22 1/2 cents spread in addition to gaining 36 cents given the more favorable basis, for a total additional return of 58 1/2 cents/bu. or $21.50/mt. Given today's close, bids would be calculated at $4.66/bu. for July delivery, $4.70/bu. for October delivery and $5.28/bu. for May delivery.

Based on this, the market is signaling the benefits of storing wheat. Of course this is determined using average prairie-wide data and calculations for individual locations will vary.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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