Spring Wheat Harvest (copy)

The U.S. government shutdown means USDA won’t be submitting any new supply and demand reports until the government reopens. That, coupled with a typically slow trading period, means the spring wheat market continues to be in a flat trading channel. And it looks like it could remain there for the time being.

“There’s not much movement one way or the other as the market is still searching for direction and news,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “That’s probably a new environment for the market, a vacuum without third-party verification of trends and that being the USDA reports.”

On Jan. 11 USDA was scheduled to release updated supply and demand estimates for the various commodities including, wheat, corn, soybeans, etc.

“We probably won’t know when those reports will be released, but it probably takes about four days to put the data together,” he said. “In addition, we don’t get updated crop condition reports, and in the middle of winter there’s obviously not a lot of them, but in some of the more southern winter wheat states it still provides a useful barometer of the condition of the crop.”

One USDA report, which is a big one for wheat, is the 2019 winter wheat acreage estimate. Those were scheduled to be released Jan. 11 but those will be delayed as well.

Peterson pointed out that weekly reports come out with exports sales.The latest one the market has to go on was dated mid December so it’s going to be close to a month of really no good data to go from as far as export sales.

“The markets have tempted to show, at least on the wheat side, some technical strength,” he said. “We get some rallies in the futures market, which have been positive, but then we kind of trade lower again on a lack of news or, in the case of wheat, continuing to see some challenges on the export front.”

In early January local cash prices for 14 protein spring wheat were averaging about $5.10 per bushel with prices ranging from $4.90-$5.20. At the Minneapolis spring wheat index, region-wide for spring wheat prices are at $5.30 a bushel, but that’s down about 20 cents from the first part of December.

Looking at trends in other major commodities, corn is up about 5 cents a bushel during that same time period; soybeans up about 20 cents, and hard red winter wheat up 5 cents a bushel, according to Peterson.

“We’re hoping to turn the corner on some stronger trends in the wheat market, but it’s tough to keep a sustained rally in the upper $5 in the futures, or that low to mid $5 on the nearby cash price,” he said.

Looking at the mid December exports, which is the most recent report available, overall U.S. wheat exports are at 614 million bushels. That compares to about 700 million a year ago which is down 12 percent.

“Of course hard red winter wheat is the class we continue to be most challenged on,” Peterson said, adding those exports are running about 33 percent behind a year ago. Soft white wheat exports are off 8 percent while soft red winter wheat exports are up 18 percent, but it’s a smaller number with just 80 million bushels in sales versus 65 million last year.

Hard red spring wheat exports are up 5 percent from a year ago with 190 million bushels in sales compared to 180 million a year ago.

“On spring wheat, from mid December there has been speculation that we’ve traded some spring wheat to China, or at least China was looking for more spring wheat which would certainly be a positive if that’s confirmed,” Peterson said. “But the market tends to rally on the rumor and with the lack of confirmation of further exports we kind of sell off. So, hopefully in January we’ll get some confirmation of some better exports to China.”

Looking at some of the other countries on the spring wheat side, sales to Europe are about equal with a year ago as of mid December. Exports to Japan are slightly behind but the U.S. is seeing some acceleration in sales on the books which is a positive. Taiwan is also equal to last year while China is a big negative. The U.S. had close to 17 million bushels in sales to China a year ago and there have been zero sales to China at present.

The U.S. is also starting to see some increased sales into Thailand, Vietnam, and, of course, the Philippines is up quite strong. U.S. sales are also higher into Indonesia so southeast Asia has been a good demand source to date.

In Central and South America, U.S. sales are slightly higher on the year to Mexico, and most of the other markets are fairly steady but, hopefully the U.S. will be able to pull out some growth in those markets in the spring.

“In Canada - our main competitors for those spring wheat markets - they’ve been doing better than expected in their August-November shipment period,” Peterson said. “In terms of non-durum wheat exports, Canada is up 20 percent with 235 million bushels versus 195 million a year ago.

“Where they’ve had good success is obviously into China. Their sales to China are double what they were a year ago with a little over 20 million bushels,” he continued. “Sales to Indonesia are up 40 percent. Probably where Canada has had the most success is in Central and South America in countries like Chile, Ecuador, Peru and the Dominican Republic. They’re all seeing a stronger shipment pace.”

Peterson also pointed out that Canadian exports to the U.S. are running about 45 percent behind a year ago.

Going forward the market will continue to trade a little bit uncertain just because of a lack of USDA reports.

“It’s kind of ironic on one hand that we, as producers, are often critical of USDA reports, but with the lack of reports coming out it’s clear some of the purpose they serve is to provide third-party confirmation of export sales, updated supply and demand numbers and, without those, the market is in a little bit of a vacuum,” he said.

As far as the acreage estimate for hard red winter wheat, some of the private estimates are looking at lower acreage trends maybe as much as 1.5 million acres less than a year ago for hard red winter, and probably 800,000 or so less for soft red winter. Producers ran into some challenging planting conditions in October in some key states so planting got pushed back.

“As far as other issues, wheat is going to track corn and soybeans to some degree,” he said. ”Weather in South America has been beneficial for our markets in recent weeks. I guess we’ll see if those weather patterns continue to be unfavorable for their corn and soybean prospects which, hopefully, will support wheat.

“Prices in Russia are starting to pick up a little bit and we’re starting to see a little stronger prices in Canada for spring wheat. Canada is actually averaging a little higher than the U.S. right now,” he said. “We are starting to see some tightness in global competitors and hopefully that means more competitive U.S. wheat exports going forward.”