After a sharp sell-off at the end of February and first week in March, the spring wheat market was able to regain some ground as mid-March approached.
“On a positive note, at the end of the week of March 10, we did see a little bit of a rebound in the markets from their pretty sharp sell-off of the previous couple weeks,” said Jim Peterson, marketing director with the North Dakota Wheat Commission. “The market had just reached an oversold condition, maybe starting to get a little more attention to the ongoing dryness in the hard red winter wheat region and also some dryness starting to creep into part of China. But I think, primarily, we’ve had just a sharp-sell off that we reached an oversold condition. We’ll see if it has any staying power on those factors.
“The big thing still is the market was trying to reach a level where U.S. export prices were more competitive on the world market,” he continued. “I think there was a thought that as we turned the calendar that U.S. exports would get a little more fire and we’d start catching more sales. Unfortunately, Russia’s prices just kept drifting lower and movement out of the Black Sea continued to be pretty aggressive.”
Added to that is the fact Australia had a record crop and continues to export quite heavily along with Canada.
“I think that as we get closer to the 2023 crop, the market decided to maybe not trade so much isolation in the U.S. market, where supplies are a little tighter, relative to the world market and so we had the sell-off,” he added.
How much was the sell-off? Looking at current Minneapolis futures, in mid-February, the May futures were $9.25, and on March 10 they were down to $8.25, down a dollar just in that short period. Kansas City hard red winter wheat lost $1.25 over that same period, and Chicago wheat lost $1.30 and fell to $8.70, which is where price levels were at prior to the Russian invasion of Ukraine.
“It reached levels that surprised a lot of market analysts,” he said.
Current cash bids for 14 protein spring wheat are about $7.50-$7.90 across the region with an average of $7.75.
Looking at fundamental issues in the market, USDA came out with its updated March supply and demand reports on March 8. There was no change in the U.S. domestic market or by class projections.
Hard red spring wheat individually is still projected to have the largest share of U.S. exports this year at 30 percent, which is up from 26 percent last year. Soft white wheat is also seeing gains in export share, up to 25 percent this year compared to 19 percent a year ago. Hard red winter wheat is the class that’s been struggling the most. Its share of U.S. exports is projected down to 28 percent from 40 percent last year.
On the domestic demand side, hard red spring wheat continues to be projected at a record level of 269 MB, up 10 percent from last year and 5 percent over the five-year average.
Hard red spring exports are projected at 230 MB, which is also up 10 percent over last year, but it’s also 8 percent below the five-year average.
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Looking at the current U.S. export pace, as of March 2, the U.S. had 639 MB in total wheat sales, which is down 6 percent from last year. USDA’s goal for the year is still 775 MB, so the U.S. still needs to see an uptick in sales over the next 2-3 months in order to reach that goal.
Hard red spring wheat export sales total 193 MB, which is up 5 percent from last year.
“But the projection is for a 10 percent increase, so even though we’ve been doing better than some other classes, we still need to capture some sales going forward,” he said. “Our biggest nemesis is Canada, which has been really aggressive out of the chute since harvest.”
Peterson explained that in the August through January period, Canada’s spring wheat shipments are up to 364 MB, which is 68 percent higher than a year ago. About 20 percent of their sales have been to China. But there has also been some pretty good sales from Canada into Peru, Colombia, Mexico, as well as Bangladesh and Indonesia.
Canada’s shipments into the U.S. market are down to 7 MB compared to 9 MB last year.
On the world scene, in its March report, USDA did make some adjustments that were a bit of a surprise. USDA lowered world wheat ending stocks by about 200 MB, of which most of that was in China where some government estimates of stocks were a bit lower than expected.
“They chalked it up to higher feed and industrial use in the prior year,” he said.
As for the current year, USDA raised world production by nearly 200 MB, primarily in Kazakhstan, which was about half that amount. USDA also raised the size of the crops in India and Australia, as well as Argentina and Brazil.
“On a positive note, USDA took world food and feed use to a record level, and it was also positive to see higher food use in India. But we did see a little decline in projected food use in southeast Asia and Bangladesh, where rice is more competitive and starting to get a bigger share of diets in that region relative to wheat,” he said.
Going forward, there’s obviously going to be more discussion on the 2023 crop and outlook. At the end of March, USDA will provide its initial look at spring wheat acreage in the Planting Intentions Report.
“There's a lot of debate on both sides of that. I think either way it will have a little bit of market impact depending on what that survey shows as well as precipitation forecasts for the winter wheat region,” he said. “They were a little hopeful that they’d catch more moisture, but the short-term forecast is a bit drier again. The further we go along, the less yield recovery that can take place with that crop, so I think that will start to become more of a market factor.”
The other big factor the market is keeping a close eye on is whether the Black Sea Initiative gets renewed or not.
“Russia is still hinting that they’re not going to extend it, but I guess we’ll know in a couple weeks what the outcome is,” he said. “If there is no renewal, I think that certainly should lend some positive trends for prices. But if it is renewed, then unfortunately, we’ll probably continue to see pressure on world wheat prices.”