CBOT weekly outlook: MGEX wheat spread widens over winter wheats

Reading Time: 2 minutes

Published: June 23, 2021

, , ,

MGEX July 2021 spring wheat (candlesticks) with CBOT and K.C. July 2021 winter wheats (yellow and green lines). (Barchart)

MarketsFarm — Hot, dry growing conditions in key spring wheat-growing regions of the northern U.S. and Canadian Prairies have seen Minneapolis (MGEX) spring wheat futures widen their spread over Chicago and Kansas City winter wheat contracts over the past few weeks — with additional strength likely given the current weather forecasts.

Nearby spring wheat futures, trading at around $8 per bushel, were posting a premium of nearly $2 per bushel over K.C. hard red winter wheat on Wednesday (all figures US$).

That marks the largest premium since 2017 and compares with early 2021 when spring wheat was trading at par or even at a slight discount to K.C. wheat.

Read Also

Photo: Getty Images Plus

Alberta crop conditions improve: report

Varied precipitation and warm temperatures were generally beneficial for crop development across Alberta during the week ended July 8, according to the latest provincial crop report released July 11.

Hot and dry weather was the main driver behind the strength in spring wheat, according to Bryan Strommen of Progressive Ag at Fargo, N.D.

With no significant precipitation in the forecast, “for the most part, I don’t even know if rain would help” the wheat crop, he said.

“They kept putting rain in the extended forecast, but it just didn’t happen, with spotty showers here and there and no big widespread soaking rain.”

While the advancing U.S. winter wheat harvest and relatively ample world wheat supplies should keep winter wheat futures under pressure and possibly weigh on spring wheat, Strommen expected spring wheat would maintain its premium, given the likelihood of tighter supplies of higher-protein milling wheat this year.

From a chart standpoint, he saw an upper target around $8.50-$8.60, with a move above that level necessary to encourage another leg higher.

For soybeans and corn at the Chicago Board of Trade (CBOT), all eyes are also on the weather.

“The forecast for the western Corn Belt is dry and hot, but there’s rain in the forecast for the eastern Corn Belt, so it’s a tug-of-war between the two and we’ll see what materializes with the weather,” Strommen said.

Acreage and stocks numbers from the U.S. Department of Agriculture on June 30 could also lead to some price swings if there are any surprises.

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

About The Author

Phil Franz-Warkentin

Phil Franz-Warkentin

Editor - Daily News

Phil Franz-Warkentin grew up on an acreage in southern Manitoba and has reported on agriculture for over 20 years. Based in Winnipeg, his writing has appeared in publications across Canada and internationally. Phil is a trusted voice on the Prairie radio waves providing daily futures market updates. In his spare time, Phil enjoys playing music and making art.

explore

Stories from our other publications