Planting wheat 12/01/18

Planting depth is crucial when planting wheat. Planting too shallow makes seedlings more vulnerable to dry fall conditions, winterkill and heaving in the spring.

The spring wheat market continued to stay in somewhat of a trading range through the month of November as it went up and down depending on a variety of factors.

“The market tended to get a few days of support and then attempted to rally on the futures market only to sell off due to either technical reasons or in sympathy with the decline in stocks and equities and oil, or the fact that U.S. and other exporters continue to face greater than anticipated competition from the Black Sea or Argentine wheat exports,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “And so we’ve just kind of ebbed and flowed on that, currently stuck in the upper $5 range for Minneapolis March futures, having been able to reach through the $6 range occasionally. Although Minneapolis has held in a bit better than some of the winter wheat markets.

“I think tighter supplies of quality wheat on the world market, pretty tight producer holding of spring wheat and pretty good export demand being trimmed on the books or being loaded out for hard red spring wheat, have contributed to the Minneapolis market showing a little bit of stability,” he added.

“Some positives going forward which may turn that around is a feeling that futures are probably reaching an oversold perspective. Technically we may hit some trigger points which will put some support in the futures.”

In the meantime Peterson feels it’s a positive that local basis values have started to strengthen. When that’s combined with the carry in the Minneapolis futures market shrinking, Peterson thinks it’s starting to show that market pipelines might be becoming a little lean, and with the demand on the books the market is going to need to pull in more producer sales and movement going forward.

“We’ll see how long that continues,” he said.

As far as local cash prices, $4.85-$5.40 will catch a lot of the average cash values across the region with an average of $5.15-$5.20. That’s probably similar to where it has been the last few weeks, but the basis gains have offset the decline in the futures and that’s helping to keep local cash prices steadier.

“The one factor that I think is very supportive to Minneapolis and spring wheat prices is that export sales have been very steady,” he said.

On the demand side, as of mid-November the U.S. has 173 million bushels in sales of hard red spring wheat on the books and that is equal to a year ago at this same time. Earlier in the fall exports were running behind so there has certainly continued to be improving demand for hard red spring wheat.

“We still have a ways to go. We’re only at 60 percent of USA’s goal for the year,” Peterson cautioned. “Typically by the end of November we like to be at 70 percent. Nonetheless, where we’ve seen very strong demand is in South Asia where sales to date are up 66 percent compared to a year ago. The Philippines, Taiwan, Vietnam and Indonesia represent pretty good growth markets.”

The drought in eastern Australia is helping the U.S. in some of those markets with protein wheat. Also, the United Kingdom continues to be a pretty good market with sales there up 54 percent.

The U.S. continues to struggle in Japan and China, of course, because of some of the trade friction. In Latin America U.S. spring wheat sales are 18 percent behind and sales are also behind a bit in Italy.

“Hopefully we can see some improvement in a couple of those regions going forward,” he said, adding that overall hard red spring wheat has been a positive.

As far as other classes of U.S. wheat, hard red winter wheat has struggled for exports and continues to see competition from the Black Sea region.

“We’ve seen some indication where shippers of Russian wheat are having a little bit more difficulty meeting some of the quality specifications, indicating their inventories might be getting tighter,” he said. “Also, there was some recent potential conflict between Russia and Ukraine over one of the main ports, and if that were to escalate it would obviously quickly cut back exports from that region and I think would be supportive of price, but as of right now it seems the situation has eased a bit.”

Nonetheless, overall U.S. wheat exports are currently 14 percent behind a year ago with 533 million bushels sold. That’s only 52 percent of USDA’s goal for the marketing year, primarily in hard red winter as well as white wheat. Hopefully the U.S. can see a pickup of exports in the next couple of months.

Another reason why some of those trends are changing, Peterson noted, is that the U.S. was recently able to capture some sales to Egypt and Tunisia, which are in a part of the world that has been difficult to trade into.

Other than the demand factors, the condition of the winter wheat crop being put in for 2019 is also impacting the market. The last condition reports for the crop are expected in the next couple weeks. In the previous report, 55 percent of the crop was rated in good/excellent condition which is up slightly from a year ago. But there is concern that areas of Kansas, Oklahoma and Texas are a little wet and late in planting. The crop in that region ranged anywhere from 16 to 20 percent in poor/very poor condition so that will need to be watched going forward.

Planting is wrapping up and approximately 86 percent of the crop is emerged which is slightly behind a year ago.

Going forward, Peterson said it is probably going to come down to the U.S. and Canada in terms of filling some of the void in the quality wheat exports, especially into parts of Asia with the Australian drought.

Canada’s shipments are running about 23 percent ahead of a year ago. August through October Canada has shipped 176 million bushels versus 143 million last year. Shipments to the U.S. are down 50 percent from a year ago.

“Where Canada has had the most success is primarily in areas where the U.S. spring wheat has struggled or is basically restricted from the market, such as China,” Peterson said. “They’ve seen very good sales into China as well as Central and South America where they’ve been very competitive with hard red winter wheat from the U.S.”

Indonesia continues to be a big market for Canada as well where they’ve had good success in south Asia. In Japan, Canada is steady with a year ago.

“I think as we move past the first of year the U.S. will probably gain the upper hand in Japan,” Peterson said. “We’ll see what happens going forward, but it’s nice to see some stability with some periodic strength in local spring wheat prices.

“If demand continues to improve on exports I think it’s going to translate into a need to pull in more producer bushels which will have to come via stronger prices before the first of the year,” he concluded.