After being on an uptrend for about three weeks, the spring wheat market has slowed down a little bit in mid-September as the end of harvest draws close.
December Minneapolis futures on Sept. 15 were at around $5.30. That puts cash prices in the region between $4.40-$4.80, according to Erica Olson, market development and research manager for the North Dakota Wheat Commission.
“There is some harvest pressure, and obviously, we’re toward the end of harvest and also we’re seeing some larger crop projections in parts of the world, so that just continues to add to the abundant supply levels,” Olson said.
Giving some context to the market, on Sept. 12, USDA released its WASDE report (World Agricultural Supply and Demand Estimate). The report had no major changes to the U.S. situation overall, although there were some very small changes to the various classes. “Otherwise, most of the changes were for the world situation and they were all pretty much bearish, unfortunately,” she said.
In the report, USDA had higher production forecasts for both Canada and Australia, which offset a decline USDA forecast for Argentina. Australia’s production was raised by 92 million bushels (MB), pushing the new estimate to just over 1 billion bushels (BB). Canada’s production estimate was increased by 73 MB to 1.3 BB.
“For both countries, that’s a near record crop, so they continue to get larger,” she said.
Argentina’s crop production estimate was decreased by 40 MB in the report, bringing the new estimate down to 716 MB, mainly because of dry conditions there.
Overall, world wheat production was projected higher this month to a new record of 28.3 BB, Olson pointed out. USDA did increase Chinese demand a bit up to 257 MB, which would be the highest in 25 years.
“We are seeing fairly strong demand from them,” she said. “But still, even with that change, ending stocks increased again this month to another record at 11.7 BB.
“It’s important to note that about 60 percent of those stocks are being held in China and India and are not really available to the world market, but that’s still a big number,” she added.
Olson explained that lately there have been a lot of factors supporting the market, including good demand, dry conditions in Argentina and increasing wheat prices in Russia.
“The fact is these large supply and stock numbers are going to continue to pressure prices,” she said.
There were no changes specifically for hard red spring wheat numbers in the WASDE report. Harvest in the U.S. is starting to wind down with about 92 percent harvested as of mid-September, and all of the spring wheat states were at 90 percent or more complete.
“In contrast to last year, we had a good harvest season (this year), good weather which minimized any harvest delays and quality issues,” Olson said. “It’s good that we’ve gotten this much harvest done because, as we get further into the month, the weather is cooler and there are shorter days for harvest. So the bulk of the crop came off in good condition.
“We’re seeing very good quality, as well,” she continued. “Looking at the samples that are collected every year for the crop quality report, so far protein is averaging around 14.6 percent, we have high falling numbers, strong test weights at 61.6 pounds per bushel average, low damage and the crop is currently grading a No. 1, so overall good quality. The big question mark is the yield.”
USDA has North Dakota’s yield at 48 bushels per acre, but producers have been reporting yield amounts all over the board.
“We’ve heard below average yields, we’ve heard above average yields so from our standpoint it’s tough to pinpoint what the average might actually be in the state,” she said, adding that USDA will provide updated numbers at the end of the month.
One thing that did cause some concern in the market, according to Olson, was freezing temperatures over Labor Day.
“For the most part in North Dakota, most of the crop was harvested or mature so there was probably very little damage,” she said. “In Canada there’s likely to be some damage, it’s tough to say, but obviously their harvest is a lot further behind than ours. We’ll just have to wait and see on that.”
According to Canada’s provincial crop report, as of Sept. 12, a third of the spring wheat crop in Saskatchewan had been harvested, while Manitoba was at two-thirds complete and Alberta’s spring wheat harvest was under 20 percent complete, meaning there is still a ways to go.
On the demand side, exports have been relatively strong and the U.S. is seeing increased demand from China. U.S. sales there so far have reached 54 MB. That compares to just 2 MB last year, a number that was impacted severely due to the tariff.
“The bulk of that amount to China has been hard red winter wheat, but we’re seeing good spring wheat demand, too, with just over 14 MB sold there,” she said, adding that overall U.S. wheat sales total 476 MB, which is up 8 percent.
Looking at spring wheat specifically, sales are up 14 percent. In addition to the good demand the U.S. is seeing from China, we also have very strong sales to Japan, the Philippines and other top customers from the Asian region.
“If we see this continue that helps support prices, but I think we have to be a bit cautious just given the larger crops in Canada and Australia,” Olson said. “We’ll definitely see more competition for exports from them.”