No End to Wheat Protein Premiums, Discounts Expected Soon

Concerns over a limited supply of higher protein wheat in the U.S. and Canada caused prices for higher protein wheat, 14%-plus, to skyrocket this past fall. While the overall supply of HRS is 6% higher than last year, the average protein level is down.

Premiums for high protein wheat haven’t been this high since the 1995/96 marketing year, when the HRS supply was reduced and protein content was lower than average.

Record wheat yields in the Northern Plains and less heat stress in the summer due to cooler and wetter than normal weather is a key reason for the lower protein content, says Jim Peterson, North Dakota Wheat Commission marketing director.

A limited supply of high protein spring wheat out of Canada has also affected prices. The early frost, cool temperatures and harvesting delays in western Canada lowered protein content and reduced available supplies of milling wheat.

Peaks in the protein price premiums and discounts usually are short-lived, dissipating as the marketplace adjusts to the crop that’s coming in. But the shortage and demand of high protein wheat and the ample supply of lower protein wheat means current premiums and discounts could last well into the new year, perhaps into spring.

Protein premiums and discounts vary by elevator, and are less in areas where higher protein wheat was grown.  Reports of protein discounts vary from four cents a fifth of a point (20 cents per point of protein below 14%) to as much as 12 cents a fifth (60 cents per point). Six to 10 cents per fifth, or 30 to 50 cents per point, seems to catch the current discounts on the board of many grain elevators now.

“The market doesn’t want the 13s or below, it wants 14 or higher, and I don’t know if that’s going to change anytime soon,” says Betsy Jensen, a grain marketing educator who also farms near Stephen, Minn.  She notes that some elevators are offering any-pro bids, which would be a break for growers with lower proteins. “In those type of situations it would seem you’re better off with 10-pro wheat at 80 bushels an acre compared to 13-pro wheat at 65 bushels,” she says.

Dennis Aardahl, a grain merchandiser with Lake Region Grain, Devils Lake, says 12 to 13% protein catches much of the wheat produced in that area this year. “Right now we’re at about a 50-cent discount for 13 pro and about a dollar premium for 15 pro,” he says. Aardahl expects the current range of protein premiums and discounts may last well into 2005, perhaps until new-crop winter wheat becomes available.

Jesse McCollum, general manager of West Central Ag grain elevator in Ulen, Minn., agrees that demand for 14-plus pro wheat will remain strong well into 2005.  “There’s a lot of lower-proteins around, 13s and below, and not a lot of demand for it.”

NDSU extension crops economist George Flaskerud advises producers with low protein wheat to consider storing it if possible until next spring or summer, or until discounts alleviate.  Elevators are able to blend lower protein wheat with higher protein wheat as it becomes available.

“If you have very low protein wheat, you might even consider taking out a CCC loan, and if the severe discounts remain, you’d have the option of forfeiting the wheat under loan,” he says. “You’d have to compare the net price you’d receive from forfeiting or selling under discount, and decide which is best.”

Southwest Grain (Gladstone, ND) Spring Wheat Prices