Protein based wheats favoured in market.
One thing a wheat producer always has trouble understanding is why prices for certain classes of wheat change. Through 2016, Ontario went through a period when HRW and HRS were at almost the same price as SRW. This is typically not the case. HRW and HRS wheat are typically the highest demanded crops and will carry premiums in the marketplace.
The Ontario wheat markets have been an interesting ride for the past 2 years. Fluctuation in wheat prices is to be expected when we are marketing a crop that is grown throughout most of the World and harvest through 11 of the 12 months of the year. Take that as a positive, or a negative, but it will most certainly lead to volatile prices – while creating opportunities for the keen marketers in the crowd.
According to Dana Omland, Grain Merchandiser for Ceres Global, there is reason for the current trend to change. Despite ample worldwide supplies of wheat Omland says “there is an abundance of low quality and lower protein wheat, making quality Canadian wheat valued at a premium”. This situation should lead to higher prices right now and in the future. Omland continues with “Due to challenging growing and harvest conditions in Western Canada, 25% of wheat came off the field as feed grade vs. a long term average of 11%”. This further tightened the supply for quality milling wheat.
This year, high protein and high quality Canadian Spring Wheat is in demand according to Omland. Minneapolis Spring Wheat futures are moving from an even price with Chicago Soft Red Winter futures in Oct, 2015 to a $US 1.33/bu premium as of the time of writing. “This is a five year high in this premium, and the trend is still pointing upwards” he finishes. To add to that, Ending stocks of high protein milling quality wheat will be very tight for the 2016/17, creating a good setup for continued tight supply fundamentals.
Despite the overall large worldwide wheat supply in 2016/17, a reduction in planted acres plus a return to trend line yields has the potential to very significantly tighten wheat supplies in 2017/18, with a significant deficit of production vs. demand being projected. World wheat production is forecasted to drop a full 4%. In the United States, winter wheat planted acres are at the lowest level since 1909. This is of course a price friendly input for the wheat market, which may well give support to wheat prices to rise well above current feed market levels.
The current situation should lead to pricing opportunity for Hard Red Winter and Hard Red Spring as we move into the future. Russell McLaughlin, Grain Originator with Palmerston Grain, agrees, “I am not sure that every wheat producer realizes how well spring wheat is trading compared to other classes right now”. McLaughlin states that “you can sell Hard Red spring for over 1.00/bu premium to SRW, with prices approaching $250.00/MT for milling grade wheat”. He continues “that value should be rewarded with some pricing action. If you are thinking about growing Hard Red Spring Wheat, then book some and take advantage”.
Markets are always fluctuating and you can never tell what the future brings, but the fundamentals today are encouraging the producer to grow protein based, milling wheat. Look forward to opportunities with Hard Red Winter in the near future and make sure you take advantage of the market if you’re thinking about growing spring wheat.