The spring wheat market was in a sideways trading pattern with prices trading around $5.60 on Nov. 10.
“We did see some strength in the market today, but for the most part, the other wheat classes and the other commodities, specifically corn and soybeans, have all been seeing strength due to various factors,” said Erica Olson, market development and research manager for the North Dakota Wheat Commission. “And spring wheat is trying to follow along, but it’s not really sure where to go.”
Olson explained that areas of drought that are affecting wheat production are primarily affecting the other classes of wheat, and not spring wheat as much. And, obviously, the strong soybean export pace has been holding up the row crops.
For the past few weeks the market has taken into account the areas of concern – some of the lingering dry conditions in parts of the U.S. and elsewhere around the world.
“In Argentina they have gotten some rain this fall, which will temper the yield losses some, but not completely reverse the situation,” Olson said. “In the USDA report today (Nov. 10), they did lower Argentine wheat production further by 37 million bushels (MB) down to 661 MB. Some estimates have it even lower.”
In the hard red winter wheat region of the U.S., it’s still dry as well, although the region did receive some precipitation which has helped a bit. The crop condition rating did go up slightly from the previous week and is now rated 45 percent good-to-excellent, but that is still below average.
“So it is concerning, but it’s a bit too early to get overly concerned about the winter wheat crop,” she said.
Some of the other areas of concern, including Ukraine and areas of Europe, have gotten beneficial rains and things are improving there. But in Russia, where producers are finishing winter wheat planting, it’s reportedly still dry there and more moisture will be needed.
In the Nov. 10 World Agricultural Supply and Demand Estimate report (WADE), USDA raised food use by 5 MB, raising that number now to 965 MB. This follows the release of the flour data from the National Agricultural Statistics Service that showed that third quarter flour production totaled 108.5 million hundredweights, which is up almost two percent from last year, and the largest for that time period in eight years.
“Another positive thing was that the previous quarter was also higher and that shows good demand for flour and wheat products, especially for at-home consumption,” she said. “USDA only made one other minor change and the other thing is ending stocks were decreased by 6 MB to 877 MB.”
Looking at spring wheat specifically, that increase in domestic use looks like it was primarily in spring wheat, according to Olson, so the spring wheat domestic food use number went up by 5 MB to 317 MB. That’s a 10 percent increase from last year.
All the other data was the same, except ending stocks went down slightly to 284 MB, but that’s still the highest level in recent years.
On the demand side, Olson pointed out that domestic demand is strong and exports are also continuing at a fairly good pace. For spring wheat, U.S. export sales are up 15 percent for the year. The biggest increases in sales are to the Philippines, Japan and China. Recently there was also a good pickup in sales to Mexico, so the sales pace there is now actually ahead of last year's pace to that country.
Total U.S. wheat sales, all classes combined, are 12 percent higher than last year.
“There’s a lot of interest in China. They do have 59 MB in purchases of wheat on the books versus only 7 MB a year ago (at this time),” she said. “The bulk of that is hard red winter wheat, but we’ve seen about 14 MB of hard red spring wheat sold.”
One thing to watch with the exports is that there is a lot of focus on the movement and sales of soybeans.
“Soybean exports are about double of what they were a year ago, so at this time the ports are pretty booked up with soybeans,” she said. “There’s not a lot of opportunity to get some new wheat shipments, but we’ll see how that plays out through the winter.”
As of Nov. 10, cash prices were ranging from $4.90-$5.30.
“It’s an improvement over what we’ve seen, but there’s not a lot of producer selling and right now the elevators are primarily handing row crops, so there’s not a lot of movement,” she concluded.