Milling & Baking News - December 10, 2013 - 11



Kansas City hard red winter
wheat basis at heady levels
Continued from Page 1

to the spot hard red winter wheat basis. The Union Pacific was said to have
less congestion than the B.N.S.F. and
lower car values, but it faced increased
demand partly as a result of the latter
railroad's problems. Especially troublesome bottlenecks included some
B.N.S.F. corridors across the northern
Plains, where significant capital improvements were under way.
Railroads were engaged in agricultural strong export programs, particularly for soybeans, and the record corn
crop with the harvest just concluded
also made heavy demands on rail and
truck transport and was expected to
continue to do so at least through the
end of December.
Foreign demand for hard red winter wheat also has been heavy during the past few months with Brazil a
particularly strong buyer because of
that country's crop shortfall in 2012-13
and Argentina's hold on exports, also
the result of a drought-reduced 201213 outturn. In its most recent weekly
export transactions report, the U.S.
Department of Agriculture indicated
exports and undelivered sales of hard
red winter wheat thus far this marketing year (by Nov. 21) totaled 305.7 million bus, up 36% from a year earlier.
The heavy export demand for hard
red winter wheat resulted in historically high export elevator bids at the
Texas Gulf. Exporter bids on 12%-protein hard red winter wheat in midNovember reached 165c over the Kansas City December wheat future. Bids

since weakened, but at 150c over the
March future on Dec. 2, they remained
at historic levels.
Rail car and power shortages for
wheat also resulted from railroad
commitment to transporting huge
volumes of nonagricultural commodities, particularly coal and other energy
commodities.
Large-volume train shipments required for exports and nonagricultural cargoes drove rail car rental rates
sharply higher in the secondary market. Some wheat merchants said rail

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high costs of securing rail cars.
The result has been mills' pipelines wore thin. Wheat shipments for
application against contracts often
were delayed, and there was little or
no relief to be had on the spot market that would facilitate filling gaps
in coverage.
Farmer selling of hard red winter
wheat recently has been light, but during the October rally in wheat futures,
producers did liquidate a significant
volume. But this supply mostly has
not been passed on to end users largely because of the freight issues. Wheat
futures prices traded lower since midOctober with several contracts setting
new season's lows, which required the

Hard red winter wheat 12% premiums,
basis Kansas City
250
200
150
100
50
0
-50
2003 2004

in cents per bu

2005 2006 2007 2008 2009 2010

car values in November were the highest in memory for a period in which
there was no nature-driven cause,
such as a hurricane or an unexpected
severe winter storm. For grain shippers to justify booking freight in the
strong market, they had to see historically high wheat premiums, especially
given the recent slide in wheat futures.
They had to weigh whether the wheat
basis was strong enough to offset the

Ebro finalizes acquisition of
Olivieri fresh pasta business
MADRID - Ebro Foods, S.A. completed the acquisition of Olivieri Foods,
the fresh pasta and sauce business of
Toronto-based Canada Bread Company, Ltd., following approval from the
Canadian Competition Bureau. Ebro
agreed to acquire Olivieri in late October for C$120 million ($115 million).
Olivieri Foods manufactures flat
and filled fresh pasta products and
sauces at its facilities in Hamilton,
Ont., and Delta, B.C. The company
had sales of C$105.5 million last year.
"The purchase of Olivieri Foods,
valued at C$120 million, is an important strategic operation for Ebro,

Business

which enters the Canadian fresh pasta
and sauce segment through its leading
brand, thus consolidating its position
as No. 1 in all the categories in which
the group operates," Ebro Foods said.
"Ebro already has a strong presence
in Canada through Catelli Foods, the
subsidiary operating in the dry pasta
sector under the Catelli brand, and the
rice sector under Minute.
"The consolidation of Olivieri will
also produce numerous additional
synergies with our European fresh
pasta business headed by Lustucru
Frais, in commercial, industrial and
marketing aspects." MBN

2011 2012 2013

cash basis to bear a greater burden in
originating wheat and encouraging
additional farmer sales.
The hard red winter wheat cash basis
also derived support from tightening
stocks. The U.S.D.A. on Nov. 8 forecast
the carryover of hard red winter wheat
on June 1, 2014, at 194 million bus,
down 149 million bus, or 43%, from
343 million bus in 2013. It would be the
third consecutive year the hard winter
wheat carryover has declined since 386
million bus in 2011. The 2014 hard red
winter wheat carryover would be the
smallest since 138 million bus in 2008
and would compare with the recent
five-year average carryover of 337 million bus. The hard red winter wheat
2013-14 ending stocks-to-use ratio was
forecast at 21.5% compared with 34.6%
in 2012-13.
The stubbornly strong hard red
winter wheat premiums were a principal impediment to flour business
in January-March. Many bread bakers held back from extending firstquarter contract balances in the hope
that rail logistics would improve after Jan. 1 and allow the cash wheat
basis to pull back. Millers cautioned
against expecting significant relief
from the historically high basis levels anytime soon. MBN
Milling & Baking News December 10, 2013 / 11

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Milling & Baking News - December 10, 2013

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