The U.S. wheat market is looking for confirmation of news to provide direction and move prices from stagnant trading range they’ve been in for several weeks.
“In early February the wheat market was continuing to search for confirmation of rumored export sales and also of progress in U.S./China trade negotiations,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “However, without a lot of confirmation of anything solid developing either way, the market could be characterized as uncertain.”
Peterson noted that the futures market is continuing to trade in the upper $5 range, around $5.75 on the spring wheat futures, but it hasn’t been able to get above $6. Chicago and Kansas City were in the $5.10-$5.25 range, which is where the market has been for a period now.
Cash prices to producers have been averaging in the $5.15 range. Looking across the region prices are $4.80 in some western locations to maybe $5.40 in the east.
“The Minneapolis Index price for hard red spring wheat as of Feb. 1 was at $5.38. A year ago we were running close to $6 so prices are a good 50-60 cents a bushel below prices of a year ago,” he said. “Hopefully we’ll see that strengthen as soon as we go forward because I know producers are anxious to make a few more cash sales as we head into the next year.”
Some potential positives that may lend support to the market is that Black Sea wheat prices are about 40-50 cents higher than some of their harvest lows and the fact they’re starting to run into a little bit tighter supply. There have also been some cold weather snaps in the U.S. and European Union and some prolonged cold weather that could possibly cause damage to the wheat crop.
“Both the hard red winter and soft red winter crops in the U.S. would be characterized as vulnerable with some of the recent cold weather,” he said.
Another positive is if some of these rumored export sales have taken place.
“There are a lot in the market that feel that the U.S. spring wheat has a fairly good shot of catching some Chinese demand,” Peterson said. “China may also be looking at some soft red winter from the U.S. Either way, that would be a positive to a market that has been looking for some news.”
Another factor going forward is that Canadian supplies may get a bit tighter, especially for some of the higher quality markets as their grade profile was slightly lower than a year ago,” according to Peterson.
“It’s still a good crop, but not as good as a year ago,” he said. “But none of that has happened yet, so we’ll see what happens going forward.”
The big thing the market is still looking for is some catch-up data from USDA now that the government shutdown has ended. The market is looking primarily for updated supply and demand reports for wheat and all the different wheat classes, as well as updated production estimates for corn and soybeans.
On Feb. 8, USDA was to release a fair amount of that data. The other data that’s still missing is the winter wheat acreage estimate, basically what got planted in the fall of 2018, as well as the Dec. 1 stocks estimate.
“That’s a critical one for wheat to see whether USDA’s yield estimate and demand estimate are accurate or whether they’ve overstated one or the other,” he said. “But we will need to see when they will release some of that data.”
Looking at some private estimates for winter wheat acreage most of them are lower than a year ago. Some estimates for hard red winter wheat plantings are 22.7 million acres. That compares to 23 million acres planted last year.
“We’re already at 100-year lows for planted acres so we’ll see once we get the official USDA estimate whether we get any market reaction,” Peterson said.
Other factors the market is looking at include the weekly export sales report which has been lacking from USDA. The agency did release the Dec. 20 numbers and have indicated they’re going to be a week late on catching up on the export sales reports at least until Feb. 22. On that date USDA hopes to be fairly current with its reports so at least it’s some news to go on, but it’s just not current.
As of Dec. 20, overall U.S. wheat sales were down 11 percent from a year ago – 632 million bushels in sales compared to 709 million last year at that time.
“USDA was projecting we’d end the year 11 percent ahead, so hopefully when we get caught up on reports on Feb. 22 it will show a pace that’s much closer to unchanged from a year ago than 11 percent behind,” he said.
Hard red spring wheat is running about 6 percent ahead of last year with 200 million bushels in sales compared to 187 million a year ago. The big markets that producers can be thankful for this year with some increases include: the Philippines, Vietnam and Thailand. The U.S. continues to hold steady in other major markets.
Going forward, Peterson pointed out there are a lot of questions regarding the upcoming new trade agreement in Asia which includes Canada and Australia, but not the U.S., and what impact that will have on wheat trade, especially to Japan.
“April is when some of the initial impacts of the tariff advantage for Canada and Australia start kicking in. No doubt it’s going to add a challenge for U.S. export sales,” he explained. “That advantage gets progressively better over the next nine years for Canada and Australia. U.S. wheat organizations are pressing the (Trump) Administration hard to re-engage in a bilateral agreement with Japan.”
The market and producers did get some early looks at potential 2019 planted area. One estimate from Agricultural Canada was projecting spring wheat planting in Canada to be up 9 percent from a year ago. That’s primarily due to reduced winter wheat and durum acres.
Ag Canada was also projecting world wheat acres to be higher and, similar to what the International Grains Council came out with, they’re projecting about a 1 percent increase in area devoted to wheat. The big increases include almost a 5 percent increase within the EU and some pretty sharp gains in Australia, mainly because of the drought last year and a shortage of feed supplies in Australia as well as some pretty hefty prices internally that should encourage plantings.
The U.S. was unchanged and, interestingly, the IGC is projecting a 5 percent decrease in Canada.
“We’ll see what happens. It would be nice to get some of these USDA reports to help fill in some of the blanks and take a little bit of the uncertainty out of the market,” Peterson said. “Until then, we remain in a trading range, which is roughly $5 cash to producers which I would say is 50 cents or more below producer price objectives.”