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Hard Red Spring Wheat Correlations

 

Thunder Bay, Domestic Milling Prices1

In Canadian dollars (CD) per metric ton (MT), the Canadian Wheat Board’s (CWB) quoted price for domestic 13.5% protein milling wheat at Thunder Bay tracks the MGEX nearby futures price very closely.  The correlation in weekly price changes from 2006 through 2012 is 0.81 which suggests that the MGEX serves as an effective hedge even over short horizons.  The cash-futures basis is relatively steady with an average of CD 59.10/MT from 2010 through 2012.

 

 

 

St. Lawrence, Export Price 1

The CWB export price for 13.5% protein HRSW is highly correlated with the MGEX nearby futures.2  The correlation of week-to-week price changes is 76%.  This indicates that hedging at short horizons (one week) would be effective at reducing risk.  Generally, the hedging effectiveness and correlations will increase as the hedge horizon increases.  Therefore, hedges held for more than one week would have an even greater correlation.  The basis for the CWB St. Lawrence quotes averages CD 93.45/MT from 2010 to 2012.

 

 

 

 

 

1 Canadian Wheat Board prices are from Agriculture Canada’s Weekly Price Summary (http://www.agr.gc.ca/pol/mad-dam/index_e.php?s1=pubs&s2=pri).

2 MGEX HRSW futures prices were obtained from the Minneapolis Grain Exchange (www.mgex.com).

 

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