THE DEMAND for high protein wheat across the globe continues to intensify, creating a premium of $80 a tonne for higher protein lines on futures exchanges.
Tobin Gorey, Commonwealth Bank, said as of Friday the spread between Minneapolis futures, primarily used to trade higher protein grades, and Chicago, usually a driver of soft wheat, had opened out to US162.75 cents a bushel, or around $80/t.
Mr Gorey said he felt this figure could grow again if concerns lingered around weather in key high protein wheat producing regions.
Cheryl Kalisch Gordon, senior grains and oilseeds analyst with Rabobank, said she expected the concerns regarding the US spring wheat crop to widen the protein premium further.
“The more issues there are with the US crop, the more support there is for the view protein spreads will widen further,” Dr Kalisch Gordon said.
“There is the assumption that Minneapolis hard spring wheat futures will hit US700 cents a bushel at some stage and some commentary suggests it could easily push up towards US800/cbu,” she said.
“This would represent a good return for Aussie farmers if it was directly translated into Aussie dollars (A$391 a tonne based on current exchange rates).”
However, over the broader wheat market she said prices would struggle to push above long term averages due to high levels of wheat stocks globally.
“Things have been quite muted given the tone of the production news in the northern hemisphere and that is largely due to the high levels of stocks.
“Even with the rallies, we are still yet to crack US500c/bu (A$244/t) on the Chicago futures exchange.”
“On the home front, we see good demand for grain, which has led to quite a good rally in barley prices, but it has come off very low levels.
“There is this strong demand, which is great, but there are still very much adequate stocks about.”
In spite of this, she said wheat prices could continue their steady rise, albeit from the low levels experienced last harvest.
“The entire wheat complex will continue to lift if we see further production issues in places such as Ukraine and Russia, which are generally producers of lower quality wheat.”
Dr Kalisch Gordon said she also expected European production to be down on average, with significant moisture deficits emerging in Spain and France, however, she said large stockpiles of wheat across the globe would limit price upside.
“The next two or three months, which will tell the tale in terms of the northern hemisphere crop, will be pretty interesting times to watch the wheat market.”