Weakness of the USD is offset with higher rail freight rates, increased elevation margins, and widening ocean freight spreads. US wheat is a long way from competitive today. Hard red winter wheat growers have sold +50%-65% of their harvest. Shippers/ware-housemen have hard red winter tucked away, despite improved row crop conditions which was supposed to push wheat to the market for Aug/Sep, but we are still waiting for those offers. Freight is now the excuse why shippers are not offering wheat in any position. The increased freight rates for nearby and deferred positions has widened the cash carry to encourage shippers/ware-housemen to hold their basis ownership.
The situation is different for soft red winter wheat. Grower sales are 80% of their harvest with excellent quality which adds to supply. Plus they have Ontario wheat competing in the US domestic and export markets. Cash bids are just treading water above delivery values on the river, with September barges bid +65 WU to keep pace with higher barge freight. There is no sizeable domestic demand for Jul/Aug/Sep, with mills covered until at least the fall. Some cash traders believe we will see the classic basis appreciation in O/N/D when row crop harvest and higher freight demand a premium for handling wheat.
The spring wheat domestic market is beginning to see some deferred interest for O/N/D, with bid/offers indicated at around +110/125 MWZ for 14.0% protein milling-quality DET trains. The spot market saw four milling-quality trains and 24 single cars, which included a mixture of Hard Red Winter wheat and spring wheat. South Dakota hard red winter wheat has been averaging 12.3% protein, close to last year’s 12.5%. A milling-quality 12.46% protein hard red winter wheat train traded at +125 KWU and eight 13.4% pro hard red winter wheat cars traded at +130 KWU.
The PNW market is quiet as harvest expands for soft white winter wheat and hard red winter wheat. The hot/dry weather is welcomed as it speeds up crop maturity. Record yields are expected as drier weather limits the threat of disease, improves the protein, and overall quality of the harvest.
