Harvest of this year’s spring wheat crop is underway, and as is typical, that’s putting a little pressure on the market.
“There hasn’t been a lot happening in the spring wheat market lately as producers are just getting a good start with harvest,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission. “In the previous three weeks, the market has been stuck in a trading range with Minneapolis September futures between $5.05 and $5.20. That puts cash bids all the way down at $4.20-$4.60, so obviously, not very attractive.
“We just can’t seem to break out of that range,” she continued. “I think there are a few things why that is. Obviously, we’re into harvest so it’s the regular harvest pressure on prices, and just overall comfortable wheat supplies, and then just the general economic concerns, as well, that are kind of holding everything down.”
Spring wheat harvest got started the last week in July. According to USDA’s crop progress report on Aug. 3, about 5 percent of the U.S. crop had been harvested with most of that in South Dakota where harvest is already one-third complete. Harvest in Minnesota was 7 percent complete, while North Dakota was at 2 percent and Montana at 1 percent complete.
Olson noted there have been very few harvest reports in North Dakota thus far.
“I think the general consensus when we’ve been visiting with producers is that, for the most part, they are expecting average to slightly below average yields,” she said. “Disease pressure the past few weeks has been up due to wetter conditions, so hopefully that doesn’t end up having a huge impact on the crop.
“The other thing is the large variance in maturity of this year’s crop as we have some harvest going on now and then some that won’t even start for another 3-5 weeks,” she added. “The latest weather forecast does look to be dry, so that will help producers that are harvesting.”
As the July WASDE (World Agricultural Supply and Demand Estimate) report showed, right now it appears that the U.S. is going to have adequate supplies of spring wheat, Olson explained, adding that USDA is forecasting that production will be down slightly, but U.S. stocks have been increasing the last couple years, so even with higher projected use, U.S. ending stocks are expected to be more than adequate, even for this year.
Looking at the harvested hard red winter wheat crop, the harvest has moved to the northern states. The crop is showing higher protein than a year ago with an average of 11.9 percent protein. That compares to 11.5 percent last year.
“That is still a bit lower than what millers would like to have, but it seems to be performing well, so it’s tough to say if we’ll see any of that demand shift to spring wheat,” she said.
Despite the large world supplies, Olson pointed out there are some regions with production concerns. Europe continues to see production downgrades due to disappointing yields caused by adverse weather both at planting and throughout the growing season.
The most recent International Grains Council (IGC) estimate for the entire European Union region is looking at a crop of 4.7 billion bushels (BB), but that’s down 10 percent on the year.
“Some other estimates are coming in even lower than that, so I think there are still concerns that the EU crop could be even smaller,” she said.
The IGC is specifically forecasting declines in France, the United Kingdom, Romania and Germany. Because of that production decline, exports could fall by almost a third and then import demand in those areas could be higher, so that could open up some opportunities for the U.S. and others to fill that export gap.
Russia has heard concerns all throughout the growing season, but they have gotten into their harvest now and production estimates have been coming up. Most production estimates are around 2.8 BB, so that’s not as big a concern there anymore. In the Ukraine, they are estimating production will be down 9-10 percent. Argentina has recently had some dry conditions, as well, so the production estimate there dropped and the new projection is 735 million bushels (MB), which is higher than a year ago, but lower than previously thought.
North Africa, where there has been some significant drought issues, production is estimated to be down 9 percent.
“So we’re definitely going to see some trade shifts and tightening of supplies in some of those areas,” she said.
On the demand side, spring wheat exports are doing fairly well this year with 105 MB in sales compared to 81 MB a year ago.
“Some of the big increases have been to some of our top customers, so again, that’s pretty promising,” she said, adding that some of those top customers include Japan, Taiwan, Korea and the Philippines. Recently there have also been some sales to China.
Last week, the export sales report actually showed that spring wheat was the largest class in terms of sales with about 9 MB. Total U.S. wheat sales are up 8 percent compared to last year with just over 350 MB.
“There are some positives in terms of price potential – we’re seeing good demand, there are some production concerns, but right now, just with the harvest pressure here in the northern hemisphere and overall world supplies being more than adequate, that is kind of putting a lid on any prices, so we’ll see what happens as we go further into harvest,” she said.