NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
February 10, 2000
George Flaskerud, Extension Crops Economist
NDSU Extension Service
Spring wheat futures in Minneapolis have been at a premium to wheat futures in Chicago for almost two years. Can that strength continue?
The premium, or spread, was calculated as the nearby futures price in Minneapolis for spring wheat minus the nearby futures price in Chicago for wheat. Nearby refers to the nearest futures price beyond the current month. An average premium for each month was derived. The monthly average premium has been in the range of 60 to 85 cents per bushel since April 1997.
An April 2000 premium of 60 to 65 cents is likely. This projection is based on a 1999 study by Rati Shavgulidze and Demcey Johnson in NDSU's Department of Agricultural Economics.
Two factors stood out in that study as key variables for predicting the April premium: the premium that prevailed in an earlier time period (November was used in the study) and March 31 planting intentions. These variables explained about 62 percent of the variation in the April premium, and the variables were significant at the 1-percent level. Many variables were examined in the study.
The nearby premium was 75 cents last November. Planting intentions in USDA's March 31 report are expected to show spring wheat acreage in the range of 14.3 to 14.6 million acres.
Current futures prices substantiate the premium projection. On Jan. 4, May futures in Minneapolis was at a 57-cent premium to Chicago.
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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136