As is typical during this time of year when harvest is in full swing, spring wheat prices are feeling the pressure.
“This time of year harvest does pressure prices. We’ve now seen September futures dip below $5,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission. “Today (Aug. 17) we were back up a bit and closed the day at $5.05, but obviously, prices aren't a bright spot for producers.”
Most cash bids in the area have been between $4.20 and $4.60.
As of Aug. 17, the U.S. crop was about 30 percent harvested. That’s still a little behind the five-year average of 43 percent.
Not surprisingly, Olson noted, South Dakota producers were further advanced with about 80 percent of this year’s harvest complete. The remaining states ranged between 19-35 percent complete.
Olson also pointed out there were some isolated areas of heavy precipitation in mid-August, mostly in the eastern growing region of North Dakota into western Minnesota, which interrupted harvest progress.
The forecast for the third week of August did appear to be mostly dry, so hopefully producers will still get some good harvest progress completed.
“Of course, after the challenges of last fall when rain caused delays, we’re still hoping for a dry harvest to minimize both the time and any quality challenges,” she said.
The few harvest reports that have come out so far are showing good protein levels, mostly 14 percent or greater with some even closer to 16 percent.
“Some producers have said they’ve been pleasantly surprised by the yields, that they’re higher than they were expecting. However, there were also other producers who were seeing lower than expected yields,” she said. “We’ll get a better handle on the yields and quality as harvest progresses.”
Earlier this month, USDA updated its yield and production estimates. For spring wheat, USDA raised the yield estimate by 2.4 bushels per acre just from last month, putting the new estimate at 49 bushels per acre, which would be a record.
“That seems a bit ambitious at this time,” Olson said. “It’s a pretty big jump in one month and we had very little harvest done at that time, but we’ll see what happens.”
Olson noted that USDA did raise its yield estimate for every spring wheat state, including North Dakota which jumped from 45 bushels per acre to 48 bushels.
“That brought our spring wheat production up 5 percent from last month, jumping from 502 million bushels (MB) to 530 MB,” she said.
USDA also raised durum yields, but actually reduced winter wheat yields. The end result was the U.S. production number did go up this month by about 1 percent to 1.84 billion bushels (BB).
The only other changes USDA made to the U.S. all wheat situation is that they increased exports by 25 MB. The two classes where exports were raised were hard red winter wheat and durum. As a result, ending stocks did decline from 942 MB to 925 MB.
Looking at some of the world numbers, production was decreased for the European Union, Kazakhstan and Turkey. Production estimates were increased for Russia and Brazil in the report, Olson noted. The overall effect was a decline in overall world production this month.
“But then USDA also reduced usage numbers so ending stocks went up again and are now projected at a record 11.6 BB,” she said.
For spring wheat specifically, USDA did increase production but it also decreased domestic use by 5 MB. As a result, ending stocks increased quite a bit from 270 MB to 293 MB, which would be the highest level in 30 years.
“That’s the hard thing for the market to overcome – not only the projected good harvest coming, but these large growing ending stocks,” Olson said.
Olson also pointed out that it’s quite possible that the Canadian spring wheat crop could be larger than expected. A recent crop tour went out and came back with numbers that would indicate a record yield.
“They’re projecting that their spring wheat production number may come in higher than some of the previous estimates,” she said.
“The good news, though, is that we are seeing good export demand still, especially for spring wheat,” she continued, adding that U.S. hard red spring wheat export sales are about 22 percent higher than a year ago.
The bigger increases in sales have been to Korea, China and the Philippines.
Canada is also seeing stronger spring wheat demand, according to Olson. Canada just started their new marketing year on Aug. 1, so they’re just getting into it, but their exports are up 2 percent.
“Domestically though, as I mentioned earlier, USDA did lower its U.S. domestic demand estimate and I think a lot of that is just due to some of the COVID impact,” she said. “They’re projecting that eating out at restaurants is still going to be limited, so that’s taking away from some of the demand.
“Other than that there’s not a lot going on in the market. We’re just continuing to watch the pace of harvest,” she concluded.