Wheat basis question

[mcfarms]

Help me out and tell me if and where I'm wrong here. Trying to determine whether wheat basis levels here are "good" or "bad"
Took the range of DNS 14 protein which by contract is this

No. 2 or better Northern Spring Wheat with a protein content of 13.5% or higher, with 13% protein deliverable at a discount.

Our 13.0 protein low end 2 red is equivalent by my understanding to this contract spec based on the difference of the way protein is calculated in the US.
I then went to the Montana wheat commission site and pulled the north central Montana wheat price for Thursday and averaged it for a 14 protein wheat and deducted the minni futures of 914.25 from the posted average of 8.47 US and came up with a 67.25 cent basis for spot delivery off Dec. from what I gathered.

Here our spot delivery off Dec. is $1.16 for #1 CWRS 13.5. even taking the currency strenth into consideration am I right to think our basis levels are out of wack?

[TOM4CWB]

It is clear by the basis... that US grain marketers NEED that wheat more than Canadian grain marketers.

For a time the western Canadian wheat marketers NEEDED wheat more than US elevators... and had a better basis. EXACTLY the same as Canola.

[mcfarms]

Tom

But did I do the proper methodology using available tools to compare basis between here and there? Should I be doing PNW values less relative freight?
Or do you agree we are out to lunch on wheat basis levels here? I'm thinking a 65 to 75 cent per bushel basis is more where it should be ( that is there in some deffered months)

[charliep]

One of the challenges with US basis off
futures is the deliverable grade is
effectively a minute quality
specification. An equivalent to an upper
end 3 CWRS or a low end 2. Even in the
Us, there is a great deal of variability
in basis depending on crop quality. At
this point, I like your idea to look at
Portland or Seattle basis to determine a
fair Vancouver price and back off to
your local elevator. You can also follow
Montana prices and compare to local
values.

The ideal solution is for ICE futures
Canada wheat contracts to work but has
to trade.

My two bits.

[charliep]

I hate tablets that make spelling
changes automatically. First sentence
refers to a mid quality wheat - not
minute wheat.

[boarderbloke]

Since the falloff on Sept 16, Wheat basis has droped here 30-40 cents.
It was simalar to last year under the CWB, now is much better for our area, at or just under a buck per bus.

[boarderbloke]

has smoothed out the drop "in the pit" price.

[mcfarms]

Interesting

Though I guess I got the response from the question I thought I would get when I asked it.

scary though

[TOM4CWB]

MCFarms,

Marketing by Northern US Basis (PNW)will be an important tool for future reference in Alberta wheat marketing.

Futures can be locked in... and delivery planned when a good basis is avaliable. Just like harvest pressure lowering prices now... so it also widens basis... NO SURPRISE.

Short production area will feel this decline less; just pure economics.

Are you done harvest?

Cheers!

[TOM4CWB]

MC,

On Basis fundementals;

Check http://www.uswheat.org/USWPublicDocs.nsf/1cc6230f4c9bb866852576150061f89b/1db74634be796b2085257a8700702390/$FILE/PR%20120928.pdf

You can see the various (PNW GL Gulf)basis levels over the past year on the charts.

It would be interesting to see if the Change in CDN port destinations and volume of grain flows have made a difference. Corn being so high... and wheat back filling feed markets... will be different than many years... re future trends to watch.

All the best!