The spring wheat market is loosely based on suspected acres planted to the crop this spring. So far, there isn’t much for bullishness. The markets have traded sideways for the last two months, according to Erica Olson, marketing specialist for the North Dakota Wheat Commission.
“Today (Feb. 19) was a bit tougher as we saw some double-digit losses and closed down at $5.55, so that puts cash prices between $4.80 and $5.10,” Olson said. “Though spring wheat has been holding up better than other classes of wheat. The winter wheat markets have really been seeing a lot of pressure. A lot of that is due to good crop conditions, slow export demand and some technical trading.”
Olson also pointed out that hard red spring wheat is now back at a $1 premium to hard red winter wheat. It narrowed down to 50 cents, so spring wheat is gaining premium back.
The market finally has some USDA reports to go off of now that the government has reopened. The February World Agricultural Supply and Demand Estimate report, unfortunately, wasn’t overly supportive for wheat, Olson noted, adding that USDA lowered total wheat use by 30 million bushels which was in the feed and residual use category.
U.S. estimated stocks have now climbed back over 1 billion bushels. That’s down 8 percent compared to last year.
“Those adjustments were primarily made because we also got the quarterly stocks report that showed as of Dec. 1 U.S. wheat stocks were at 2 billion bushels which was slightly higher than expected,” she said.
For hard red spring wheat, USDA lowered domestic use by 7 million bushels and thus U.S. ending stocks climbed by the same amount and are now at 262 million bushels.
“Basically, the theme of those reports was higher stocks which obviously is not price positive,” Olson said. “World numbers really didn’t change substantially though there were some minor adjustments to production.”
In February USDA also released the winter wheat seeding report, which was supposed to come out in January. The estimated winter wheat acres are 31.3 million acres which is down 4 percent from last year and the second lowest on record.
“This number wasn’t surprising. It was within expectations, so we didn’t get much of a market reaction. That combined with the higher stock levels mitigate any concerns over supply levels,” she said.
“We’re also catching up on export sales reports,” she continued. “We now have sales through Jan. 3 so we’re still a few weeks behind. That week’s sales were a bit disappointing at just under 5 million bushels versus 22 million the previous week. However, that does represent some sales between Christmas and the New Year which is traditionally slow anyway. But we are making some gains.”
Total U.S. sales are at 658 million bushels, which is down 8 percent. Spring wheat sales are actually up about 7 percent at just over 200 million bushels.
The class that’s really struggling is hard red winter wheat which is down 28 percent.
One thing that’s been in the news a lot lately, Olson noted, is Russia with some higher prices there.
“Some were expecting that perhaps the U.S. would pick up some sales from that which we might normally get, but that is not happening,” Olson said. “Also, their government put to rest any rumors about export restrictions, so they do not plan to place any at this time.
“Trade news is still in the market, but really it’s still a lot of talk and no tangible results,” she continued. “In terms of wheat we’ve seen no sales to China yet, so the market is getting a little tired of that.”
In other news, this is a pretty quiet time of year in terms of production. There are still some concerns about Australia being dry and areas near the Black Sea and that could impact next year’s production, but it’s too soon to tell.
The last area of focus for the market is acreage for 2019. The International Grains Council has acres up slightly worldwide. Ag Canada is projecting their wheat acres, excluding durum, to be up 2 million acres.
“Here in the U.S. almost everyone projecting higher spring wheat acres. We will get a better idea with the March planting intentions report,” Olson said. “That expectation of higher acres is probably also keeping prices a little at bay as well.”