Fargo, North Dakota
July 14, 2005
By George Flaskerud, Crops Economist
North Dakota State
University Extension Service
Recent production estimates for U.S. spring wheat and Canadian
wheat point toward protein premiums possibly decreasing somewhat
into harvest, but remaining relatively strong. The highest
premiums likely are to occur during September to November, a
period when a number of peaks have occurred historically.
Discounts could decrease a little throughout the year if average
or better quality is achieved in the United States and Canada.
During September to November of this year, a premium around 70
cents might be expected for 15 percent protein relative to 14
percent protein in the Minneapolis spot cash wheat market. This
projection is based on the 1997-through-2004 relationship
between protein premiums in Minneapolis and U.S. hard red spring
wheat (HRS) and Canadian wheat yields. The yields of these two
crops explained about 96 percent of the variability in premiums
during the study period.
The same procedure was followed to derive a projected discount
for 13 percent protein relative to 14 percent protein. Around a
40-cent discount might be expected, according to the model.
However, the yields explained about 80 percent instead of 96
percent of the variability during the study period.
The projections were based on production estimates by the USDA
on July 12 and Agriculture Canada on June 28. From the data, a
U.S. yield of 42.2 bushels per harvested acre was estimated for
HRS. Canada projected its yield at 39.3 bushels. Last year,
yields averaged 42.2 for HRS and 41.8 for Canadian wheat.
The monthly average premium in Minneapolis for 15 percent
protein was 88 cents in June. The high monthly average during
this past year was 91 cents in November. On July 8, the premium
was 90 cents.
The monthly average discount in Minneapolis for 13 percent
protein was 61 cents in June, which was the high for the year.
On July 8, the discount was 60 cents.
This past year the model underestimated the premium by 11 cents
and the discount by 15 cents. However, quality was a major issue
in Canada, which would have added to the premiums and discounts.
The quality of the Canadian wheat crop very likely is to be
better than a year ago. It was abnormally low in 2004. In
Saskatchewan, only 6 percent graded No. 1 versus 59 percent for
the 10-year average, according to Saskatchewan Agriculture, Food
and Rural Revitalization Report No. 34.
How the quality of the 2005 HRS crop will compare with previous
crops is uncertain at this point. A year ago, in the four-state
region of North Dakota, Minnesota, South Dakota and Minnesota,
the protein was down from the five-year average, but the grade
was the same, according to the 2004 regional quality report. The
average protein in 2004 was 13.8 versus the five-year average of
14.5 percent (12 percent moisture).The average grade was No. 1
northern spring wheat for both 2004 and the five-year average.
Other factors to consider are the protein and quality of the
hard red winter wheat crop, even though yield was not a
significant factor in preliminary analysis. The level of protein
in the crop is down from a year ago, but still about average and
the overall quality of the crop is better. Preliminary data from
3,405 carlot samples from 49 counties show an average protein
content for Kansas of 12.2 percent (12 percent moisture),
according to a Kansas agricultural statistics report for the
week ending July 2. Last year's crop averaged 12.8 percent while
the 10-year average is 12.1 percent. Samples grading No. 1, at
75 percent, are up from 51 percent last year. |