As high temperatures in early and mid-June put some pressure on spring wheat crop development, it also put some pressure on prices.
“We have seen spring wheat prices lose a little steam the last two weeks, said Erica Olson, market development and research manager for the North Dakota Wheat Commission, on June 21. “In the last week or so we’ve seen kind of a sideways trading range bouncing back and forth.”
She noted that the July Minneapolis futures have been trading between $7.45 and $7.70. As of June 21, that put cash prices between $6.95 and $7.25.
“We’ve talked a lot about this being a weather-driven market. It still is, but we have seen precipitation over the region the last couple weeks and that’s quieted the markets down a little every time it sees that precipitation fall,” she said. “The reality is the moisture was more than welcome, but it did come too late in areas and some portions, like the north central part of (North Dakota), have gotten very little precipitation, so there has been damage done and yield potential will be down.
“Same thing as durum, even the areas that have received precipitation will need more to get through the rest of the growing season,” she added.
The latest crop progress report from USDA that came out June 21 was a bit surprising. In terms of development, 27 percent of the spring wheat crop has headed out. That compares to an average of 18 percent, so the crop is definitely being pushed ahead due to the hot, dry conditions. In both Minnesota and South Dakota, about two-thirds of the crop is headed out. For Minnesota, that would be 40 percent ahead of average.
North Dakota and Montana are a bit lower at 18 and 14 percent headed out, respectively.
According to the report, crop condition ratings dropped again in mid-June, in fact, a bit more than expected. Only 27 percent of the U.S. spring wheat crop is rated in good-to-excellent condition. The previous week the crop was rated at 37 percent good-to-excellent and last year at this time the rating was 75 percent. The bigger than expected drop in condition ratings will likely get the markets moving a bit higher.
“These are the worst conditions since 1988. In North Dakota only 19 percent is in good-to-excellent condition and 50 percent of the crop is now rated in poor-to-very poor condition,” she said.
Things are a bit better in Montana and Minnesota with better crop conditions in those respective states.
“I think one thing that’s stopping the market a little is we are seeing higher production prospects from other wheat producing regions,” Olson said. “In the June WASDE (World Agricultural Supply and Demand Estimate) report, USDA increased production estimates for Europe, Russia and Ukraine. Those were areas of concern a month or two ago because of dry conditions, but they have since received timely precipitation and production is expected to be higher now.”
World wheat production is now forecast at a record 29 billion bushels (BB).
Looking at the U.S. winter wheat crop, harvest is about 17 percent complete. That’s a bit behind average because of rainy weather that has slowed harvest progress. Thus far, however, good yields have been reported along with strong test weights. However, protein is reported to be lower in some areas.
Because of those conditions, USDA has raised U.S. wheat production estimates by 26 million bushels (MB). That brings the new total up to 1.9 BB, primarily based on a higher yield estimate for the hard red winter wheat crop.
On the demand side, two weeks into the new marketing year exports for spring wheat were at 63 MB. That compares to 70 MB a year ago, so a bit slower.
“Sales are actually down to some of our more traditional customers, especially in Asia, but up substantially in Central and South America, specifically Mexico,” Olson said. “The big thing, especially for these next couple of weeks, is seeing how the weather pans out and how much further these crop conditions can decline.
“On June 30 we’ll get updated acreage numbers and then in the July WASDE report is when we get class by class wheat projections, so it will be interesting what those show given our current state of the wheat crop,” she concluded.