Canadian Red Spring Wheat basis hits record low on poor demand, planting delays

Source:  S&P Global Platts
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The Canadian Western Red Spring Wheat 13.5% FOB Vancouver basis assessment fell to record lows on May 20, with FOB prices moving in lockstep as Canadian commercials looked to fill out capacity during a time of reduced export demand, sources said.

The CWRS Wheat assessment during the week of May 16-20 for the 30-45 day-forward period fell 22 cents to 59 cents/bushel, while the 45-60 day-forward loading period shed 25 cents to 61 cents/bu. The 60-75 day-forward loading period fell a further 31 cents to 65 cents/bu.

The assessment for the week of May 16-20 fell on feedback placing the weekly Japan tender for July shipment closer to 60 cents/bu, contrary to indications heard late last week at 70 cents/bu. The Japanese tender, coupled with bid-offer ranges heard for July shipment at 60-65 cents/bu and for August shipment at 65-70 cents/bu pushed basis values further down to end the week on May 20, surpassing previous record low levels, according to data from S&P Global Commodity Insights.

CWRS Wheat 13.5% FOB Vancouver prices followed the movements seen in basis values. Spring wheat prices for the 30-45 day-forward loading period fell $47.34 to $491.63/mt, the 45-60 and 60-75 day-forward loading periods followed suit, falling $48.13 to $492.37/mt and $50.34 to $493.84/mt, respectively.

Following the movement in the weaker Canadian Spring wheat prices and basis values, the spread among the three loading periods for the assessed basis and prices appeared to flatten to end the week on May 20.

Sources said planting delays in Manitoba and Eastern Saskatchewan fell four weeks behind schedule due to rainy weather. The delays could cut 10-15% of farmers’ yields, leaving few farmers with well-drained soil to plant their crops. Consequently, on May 20 the Manitoba Agricultural Services Corporation extended the crop insurance deadline for seeding of soybeans.

The extension came after Manitoba corn and soy farmers reportedly considered changing their crops to spring wheat, as the window for planting narrowed and the potential for yield loss because of frost risks increased.

“With the recent delays in planting in Manitoba and Saskatchewan, even with the extension, ultimately, we will see significant acres unseeded, as the soil will be too waterlogged, those guys are really going to struggle, it’s not great conditions for them,” a CWRS farmer said. “Though the extended deadline’s purpose is to promote planting, as it’s better to extend planting versus trying to plant an alternate crop.”

At the same time, fertilizer and diesel prices have risen, further cutting into margins.

“Though it’s still in the farmer’s interest to put the crop in the ground,” the same farmer said.

“Farmers continue to seed in dryer parts of western Canada and in the east wait for drier conditions so they can start seeding,” a second CWRS source said. “Seems like by end next week – if forecasts hold – should finally make some progress on seeding in these difficult areas.”
Basis values could rise in coming months, enticing farmers to sell. October values are stronger because post-harvest, farmers can fill their storage more easily, a CWRS trader said.

“While the focus remains on wheat outlooks and planting progress, offers could be more aggressive if farmers start planting without weather issues,” a fourth CWRS source said.

The primary concerns right now seemed to be poor demand for old crop and planting progress in the coming days for Canadian Spring wheat farmers.

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