Spring wheat futures fell C$22 a tonne this week, but CWRS bids fell only C$7 as basis narrowed again while country elevators shipped more wheat than farmers delivered.
- Futures dropped sharply, but cash bids gave up only about a third as much.
- Country elevators shipped more wheat than farmers delivered, so elevators need wheat; port stocks also fell, for reasons the reported flows only partly explain.
- More farm deliveries, or slower shipments from country elevators, would take away the reason for the basis to stay this narrow.
December spring wheat futures fell C$22.00 a tonne this week. About C$18 of that came from the lower US-dollar price and about C$4 from a stronger Canadian dollar. A weekly market outlook covering the same days tied the fall in US wheat futures to expectations of peace talks over Ukraine and to weaker corn. Daily reports said that on October 21, when Chicago wheat hit an 11-week low, traders were weighing what renewed talks could mean for Black Sea grain exports.Charts: Exhibit 20
CWRS bids held up far better. The median regional spot bid fell C$7.05, so basis narrowed by C$14.95 to minus C$26.84. It has now narrowed in all nine regions in each of the past four weeks. Last week basis was still wider than the five-year average. It is now narrower than both last year at this time and the five-year average, although one of the past five years was narrower still. The four-week narrowing remains larger than in any of the past five years over the same weeks. Basis also narrowed in early October, when futures barely moved, so this is more than bids lagging a falling futures market.Charts: Exhibit 20, Exhibit 17, Exhibit 21
The firmest sign of a pull is in the country elevators. They shipped about 92,000 tonnes more wheat than farmers delivered, and their stocks fell for a third straight week, by 90,000 tonnes. Farm deliveries were the lowest for this week in six years, while shipments were about normal for the time of year. Country stocks are above average in tonnes but near usual in weeks of cover. When elevators ship more than they take in, they need deliveries, and a narrower basis is how that need shows up. Port stocks point the same way but are harder to read. They fell by 168,000 tonnes, from slightly above average last week to 13 per cent below it, below the five-year range for the week. Exports were within the usual range for the week. Exports and domestic shipments from the ports together ran about 110,000 tonnes ahead of port receipts, which accounts for about two-thirds of that fall. The other 58,000 tonnes is not explained by the reported flows, so the port figures add some support but cannot show on their own that buyers need more wheat.Charts: Exhibit 5, Exhibit 7, Exhibit 10, Exhibit 2
The regional pattern no longer follows local stocks closely. Last week basis narrowed most in Manitoba, where elevator stocks are lowest against normal. This week Manitoba narrowed least, even though its elevator stocks fell by a larger share than those in Alberta or Saskatchewan. Northern Saskatchewan narrowed most, and Saskatchewan had the largest stock draw in tonnes. Nor does the pattern point to one port. Vancouver stocks rose, while St. Lawrence and Prince Rupert stocks fell. The pull looks system-wide rather than tied to one region or one port.Charts: Exhibit 21, Exhibit 7
Buyers are paying for wheat now rather than later. Deferred bids sit at a wider basis than the spot bid, which takes back much of the futures carry. After interest, the median gain is under C$2 a tonne for November or December delivery and about zero or below for later months, and no month pays in northeast Saskatchewan. If shipments from country elevators keep running ahead of farm deliveries, the pull on bids should continue. If farm deliveries pick up or shipments slow, the reason for a basis this narrow would weaken.Charts: Exhibit 62, Exhibit 65
Wheat excluding durum unless an exhibit says otherwise.