Spring wheat futures at the Minneapolis Grain Exchange (MGEX) posted steady declines over the past month, but have found some support as farmer selling backs away and basis levels improve, said a spring wheat broker who expected prices to rise in the short term.
Demand for hard spring wheat has been routine, despite the drop off in interest for soft wheat in the export market, said Austin Damiani, a broker with Frontier Futures in Minneapolis.
"The real feature has been the lack of farmer selling," he added, noting that while the May futures have declined by about fifty cents over the past month, to just over US$8 per bushel, the lack of deliveries led to a rally in basis.
"Pipeline stocks are not getting replaced due to the lack of farmer selling," said Damiani. As a result, the calendar spreads are tightening in. In addition, "the basis is taking over and is rallying to make up for the break in wheat (futures) prices... We anticipate that either futures will rally, or basis will need to rally further."
Even with only routine demand, the market will need to bring in more stocks from the country. Farmers have the wheat, but Damiani said it was now a matter of getting prices to a point where they will let go of some of it.
Futures prices would need to get back to the US$8.50 per bushel level to trigger a round of farmer selling and "we'd get the whole crop at $9," he said.
Looking ahead to the new crop, spring wheat is facing increasing completion from corn and soybeans in the northern tier states, and that fight for acres should underpin values in the new crop months, said Damiani.
Overall, he expected spring wheat acres will be stable, or up a little in the U.S.
-- Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.