Spring wheat

The wheat market has seen some positive price movement recently, mostly on concerns of dryness in the winter wheat areas of the U.S., as well as in the Black Sea region and in Argentina.

On top of that, the market has had quite a few USDA reports to digest, which were kind of mixed in terms of being bullish or bearish, according to Erica Olson, market development and research manager for the North Dakota Wheat Commission.

As of mid-October cash prices around the region were ranging from $4.65-$5.05.

The first report the market digested was the small grains summary at the end of September.

“One surprising thing out of that was the spring wheat acreage number for North Dakota,” Olson said. “USDA lowered acreage down to 5.7 million acres. That compares to 6 million in June.

“We weren’t really expecting that decline, but it didn’t have that much of an effect on the market because, in contrast, Montana acreage went up by 300,000, which mitigated our decline and we also saw an increase in Minnesota,” she continued, adding that the final spring wheat acreage for 2020 came in at 12.3 million acres versus 12.2 million in the earlier estimate. So the overall number really didn’t change much, it was just adjustments to the individual states.

USDA also adjusted this year’s yield estimate down slightly, pegging the final yield at 48.6 bushels per acre. That puts total spring wheat production at 586 million bushels (MB), which was a little above the trade expectations and about 36 MB higher than the first production projection.

“Really there were no big surprises in that report, and for the most part, just strong production numbers,” she said. “On a side note, North Dakota is once again ranked the No. 1 wheat producing state in the country.”

The day USDA released the small grains summary, it also came out with the Sept. 1 stocks report. That report was a bit positive for wheat because the wheat stocks number came in below expectations at 2.16 billion bushels (BB), which is down 8 percent from last year. The June through August disappearance was about 4 percent higher than a year ago, so there were some positive numbers from that report.

Based on those September reports, USDA did make some adjustments in the October World Agricultural Supply and Demand Estimate (WASDE report). For the all wheat situation, U.S. wheat supplies were lowered 32 MB, and feed and residual numbers were raised 10 MB.

As a result, U.S. ending stocks are now actually projected to be their lowest in six years at 883 MB.

“So that’s a good direction, but we do still have a stocks to use ratio of 42 percent, which does indicate fairly good supply levels,” Olson said.

Just looking at the spring wheat numbers from the WASDE report, Olson noted there were no huge changes. Domestic use was increased by 5 MB, so of course, stocks went down by 5 MB, as well, but all the other numbers remained the same.

“But at 288 MB, stocks are still the largest we’ve seen in recent years and that will be something that continues to pressure the market,” she said.

Looking at U.S. wheat exports, there is still decent demand for U.S. wheat. U.S. total wheat sales are up 8 percent from last year with the biggest increase in demand so far coming from the Philippines, China and Brazil.

Looking specifically at spring wheat, sales are up 18 percent on the year, according to Olson, pointing out that, in fact, all classes are higher, except soft red winter, which is down quite a bit.

“October through December tends to be a bit slower time period for wheat exports because the focus is turned to soybean and corn harvest and movement,” she said. “So we’ll see how that trend goes through the end of the calendar year.”

Regarding some of the concerns about the dry conditions, Olson explained that much of the hard red winter wheat region has been classified from abnormally dry to being in exceptional drought conditions.

“That is a bit concerning especially since we’re still planting,” she said. “Nearly 70 percent of the winter wheat has been planted, slightly ahead of average. That definitely bears watching, especially to see how the crop emerges under those conditions.”

Russia and Ukraine are also very dry and that is affecting winter planting there, as well. Many areas have only had 20-30 percent of normal precipitation. Again that could affect planted acreage and crop establishment.

On the flip side, Olson noted that Russia’s crop for the current year continues to get bigger. Its current estimate for production has been raised again to now just over 3 BB, which would be the second largest crop in history.

In Argentina, because of the dry conditions, their production continues to trend lower.

“The current estimate is just under 700 MB, and some are forecasting it may go even lower,” she said.

In terms of world wheat production for the current crop, USDA once again raised production and ending stocks, so ending stocks are at another new record level 11.8 BB.