Agricultural Update: CME Canadian Wheat (Platts) Futures Open interest hits 110,000 tons

Since the beginning of March, CWR open interest has increased from 10Kmt notional to 110Kmt as of today (Wednesday 8^th May). During that time, the CWR basis MW (Minneapolis Hard Red spring wheat) has rallied hard in both old crop and new crop, Jul24 contracts have traded from +103mwn to +130mwn and Dec24 basis has gone from a +89mwz offer to trading 125mwz. The main drivers have been the lack of farmer selling, rail strike concerns and old crop end of season protein spread divergence.

Recently, farmer selling has returned and in significant volume in response to the global wheat futures rally and the more favourable new crop planting conditions, with good rainfall in the forecast for western growing areas. Exporters are keen to move the grain quickly, CWRS 13.5% FOB Vancouver Jul24 cash basis is ~+120mwn mids, and is starting to weaken as the board rally continues following US HRW basis. Seasonally this makes sense, however, views on the nearby CWRS basis for loading in May-June are that the strike threat should keep it steady/firm for the time being with current market indications +130/140mwn for 30-45 days loading.

Both the Canadian National and the Canadian Pacific Kansas City unions voted overwhelmingly (95% in favour) for strike action which could start as early as 22nd May. Grain growers of Canada think the strike action could cause substantial losses as elevators would not be able to accept grain and estimate potential losses of around CAD $35m per day for the sector. It is worth noting this is the first time the two unions will have gone on strike at the same time and expectations are for the Gov’t to intervene. However, a real fear is if the farmer doesn’t complain the Gov’t may not feel compelled to get involved immediately – meaning a strike of 1-2 weeks is a very real possibility. Estimates are for every one week of strike, it will take two and a half weeks for logistics to get back to normal.

The Japan Ministry of Agriculture Forestry and Fisheries tender this week will be an interesting signal as to what market thinks of the strike threat and current pricing.

CWR futures compliment the MGEX contract and allows both producers and consumers the option to hedge Canadian logistics which uniquely represents the globally vital FOB Vancouver export market.

SSY Futures Limited are the No1 broker in this contract with a market share of over 95%, IF you would like to know more please get in contact with Andrew Rechten, Head of Agricultural Derivatives – a.rechten@ssyglobal.com