Minneapolis Wheat Spot Bids
Recently, we have observed that wheat bids are becoming very competitive and reaching positive values in certain areas across North Dakota. Strong domestic demand, combined with decreasing secondary rail freight rates, has contributed to historically strong basis levels.
The spot floor serves as an auction house where an elevator evaluates the grades of their loaded cars and invites bids from competing mills seeking grain. The bids made do not have to result in a trade, and if an agreement is not reached, the cars remain available. However, once the cars are loaded, the elevator has a limited time before the railroad starts charging demurrage.
Current demand can be seen in the Minneapolis spot floor bids (note that some of these values pertain to single loads, which command a premium due to higher freight costs).
The data pulled directly from the USDA website shows the spot bids for 14.0% protein spring wheat. We are witnessing 14's trading between +1.80H and +2.60H. Additionally, secondary freight is trading at nearly $1,000 per car less than the rates observed during September through early November, which is helping to elevate basis levels.
I have also seen 13.5% protein wheat trading near $1.55, which, after applying a $0.12 discount for each 1/5th on protein, results in a price of approximately $1.85 for a 14.0% protein shuttle. While this information does not provide full clarity, reviewing the bid structures and current trading values indicates that FOB prices are coming in near $0.40. Elevators need to deduct their margins from these FOB values to continue operating, which explains the $0.10 to $0.30 basis bids currently available for wheat.
A strong spot floor supports robust basis levels throughout the entire complex. If to-arrive bids were not competitive with the spot floor, we would see a slowdown in the sale of to-arrive bushels, as elevators would prioritize selling bushels over the spot floor.
Alex Andel
Basis and Freight | Market Advisor, Northern Plains
As our basis and freight expert, Alex assesses current market conditions and forecasts future scenarios. His keen insights create transparency in the cash market, resulting in significant returns for our clients.
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