U.S. spring wheat protein premiums rebound

Growing export demand have helped reverse what had been a historic discount between hard red spring wheat with 15 per cent protein and the lower grades, trade sources said.

The biggest U.S. spring wheat crop in two years and the second straight year with above-average protein content led to an "inversion" in the closely-watched protein scales at the Minneapolis Grain Exchange.

"It’s the same old story, whatever is not available is worth the most. Typically protein is not available and it commands the premium. This year, it’s no secret that we’re high wheat protein," said Tim Emslie, research manager at CHS Hedging Inc. in St. Paul, Minnesota.

Spring wheat, valued for its high protein and gluten content, is used to bake bagels, rolls, pizza crust and pasta. This year’s crop, grown primarily in the northern U.S. Plains, averaged 16.6 per cent protein, equal with the average protein in last year’s crop that was the most in five years, according to the U.S. Wheat Associates.

The glut of protein led to spring wheat containing 15 per cent protein trading this month at more than a 40 cents per bushel discount to wheat containing 13 per cent protein, the widest discount since December and only the second time in five years a discount was seen, according to Reuters data.

The discount has since reversed course, with the higher-protein wheat hitting a premium of about seven cents per bushel Oct. 30, the biggest in a month.

Discounts of high-protein wheat are rare as wheat buyers often are willing to buy higher protein grain and then "blend it down" with low-protein wheat.

In 2008, high-protein 15 per cent wheat hit a record premium of roughly $8.75 per bushel more than 13 per cent protein wheat when tight spring wheat supplies pushed MGEX futures to an all-time peak $24 per bushel.

Many U.S. flour mills covered their needs for high-protein wheat during harvest and in recent weeks aggressively bid for lower-protein grain. Mills blend their wheat to achieve a consistency in the flour they produce.

But while domestic demand for high-protein spring wheat was decreasing, foreign buyers stepped up purchases.
U.S. exporters in the most recent reporting week sold 189,515 tonnes of spring wheat, led by top buyer Japan. The sales were the largest in eight months.

A trader in the U.S. Pacific Northwest said there was steady demand for what he called a "healthy" crop.

"There is a demand for the higher-protein wheat," he said.
Concerns of poor quality grain at other major exporters — due to too much rain in Argentina, too little in Australia — could lead to more demand from the United States, traders and analysts said.

However, Canada currently is offering the most attractive prices for wheat exports into Asia, the Pacific Northwest trader said. Earlier this month, China bought at least 295,000 tonnes of Canadian spring wheat in the largest such purchases in years.