June 20, 2018

HRW harvest was delayed with 2-4+ inches of rain across Kansas. No one is worried about quality at this time, but if it continues into next week there could be drop of test weight. Cash basis continues its firm tone, but traders are questioning the need to make space this fall after this rain event improves the row crop conditions. Domestic HRW basis closed up 5 ct/bu today in HRW. The domestic spring wheat basis closed mixed today with more demand for the lower protein cars, but buyers expect some selling pressure going into the summer months as growers realize they have a huge crop coming. The PNW got a surge of export demand today, with Korea announcing a tender for 2 cargos and CCC announced a tender next week for 111 kmt SWW for July 26-Aug 9 shipment to Yemen. Cash basis on PNW remains firm as exporters see more demand than grower sales at this time.

US wheat rally today stopped the narrowing of the world wheat price spread, just what the market doesn’t need. Russian wheat values broke the $200/mt mark today & were offered at $198/mt. EU traders were suggesting the cash basis for HRW needs to break, but this just cannot happen. The introduction of the VSR storage rate continues to support the cash basis since as the demand for storage revenue is the best source of revenue for warehousemen. This leaves the futures market to do all the work of making US wheat competitive at some point. The smaller crop, the huge inventory of delivery wheat stocks, and dysfunctional freight structure within the delivery markets make it very difficult for a cash short to make delivery wheat work against their sale. The only option is much higher basis than the fundamentals of the b/s would suggest. As I told an EU trader today, an asset manager cannot make money with empty space and VSR carry forces them to fill all their space with wheat.



Cash Values