Spring wheat futures ended the week flat, but CWRS bids rose as basis kept recovering from a wide harvest level, helped this week by a jump in exports.
- Basis has narrowed four weeks running, coming back from an unusually wide level at harvest.
- This week wheat moved quickly to port and exports picked up, but elevators are not short of grain.
- A return to slower loadings would leave less reason for basis to keep narrowing.
December spring wheat futures went up early in the week of October 5 to 9 and down late, ending at C$364.57 a tonne, C$0.80 lower than a week earlier. Market reports tied the early gains in Chicago wheat to Russian signals of more strikes on Ukrainian infrastructure, which raised the risk to Black Sea shipping, and to slow US winter wheat planting. They tied the late losses to traders expecting larger US stocks, then to USDA's 9 October report, which raised US ending stocks and cut the US export forecast, and to a sharp fall in corn. In US dollars the contract fell slightly; a weaker Canadian dollar made up part of that.Charts: Exhibit 20
CWRS bids did better than futures. The median regional spot bid rose C$3.20, so basis narrowed by C$4.00 a tonne, and it narrowed in all nine regions. Over four weeks futures fell while the median bid barely moved, because basis narrowed C$13.05, more than in any of the past five years over the same weeks. Basis is still about C$14 wider than the five-year average for the week.Charts: Exhibit 20, Exhibit 17
Most of that narrowing was a recovery from an unusually wide harvest basis. In the first week of September basis was more than C$25 wider than the five-year average for the week. In the first three of the past four weeks, basis narrowed without an export surge: weekly exports were below the five-year average in two of them and close to it in the third.Charts: Exhibit 20, Exhibit 5
This week was different. In the week to October 11, exports of wheat excluding durum rose to 608,600 tonnes from 398,600 the week before. That is a normal level for this week of the year: four of the past five years shipped between 549,000 and 699,100 tonnes, and only 2021-22 shipped much less. Port receipts from country elevators were the second highest for the week in six years, so this week's narrowing came with fast movement to port. To keep grain moving at that pace, elevators need deliveries, and a narrower basis is how that shows up.Charts: Exhibit 2, Exhibit 5
The system is not short of wheat. Country elevator stocks fell in the week as shipments outran deliveries, but on October 11 both country and port stocks were still above the five-year average in tonnes and near usual in the weeks of shipments they cover. The four-week export average is slightly below the five-year average and below the weekly pace needed to reach the official forecast. So the narrowing reflects a wide harvest basis returning toward normal, with exports at about their usual pace for the week, not a shortage in the country.Charts: Exhibit 5, Exhibit 7, Exhibit 2
For wheat in the bin, waiting earns little. Deferred bids sit at a wider basis than the spot bid, which takes back most of the futures carry, so after interest the gain from later delivery is below zero in north and south Alberta and northern Saskatchewan, and at most about C$10 a tonne elsewhere. Exports that keep running near this week's level would give basis more room to close the gap to average. On October 11, after the week's trading, the US President said Russia and Ukraine had agreed an energy ceasefire; if it holds, it eases part of the Black Sea risk that market reports cited early in the week.Charts: Exhibit 58, Exhibit 65
Wheat excluding durum unless an exhibit says otherwise.