There have been a few things going on around the wheat market, unfortunately those things have not been able to push local cash prices higher.
“We’ve seen futures come back a little bit recently, this is after a big slide since March,” said Erica Olson, marketing director for the North Dakota Wheat Commission.
“Right now futures are trading at about $5.31, and that puts cash prices between $4.50 and $4.85. Obviously those are not overly attractive.”
One of the things going on in the market is that USDA reports continue to be fairly bearish for wheat. Also, U.S. export sales haven’t been where the market and producers would like them to be, and the winter wheat crop so far appears to be in good condition. All have contributed to help pressure prices.
Starting with the USDA reports, the April WASDE report (World Agricultural Supply and Demand Estimate) that came out in mid-April and, similar to previous months, USDA lowered domestic use and exports and raised ending stocks. USDA lowered feed and residual use by 10 million bushels and exports by 20 million resulting in U.S. ending stocks being pushed 32 million bushels higher this month to 1.087 billion bushels.
“That is actually lower than last year by 12 million, but the thing is every month that number gets bigger and, of course, that weighs on prices,” Olson said.
The USDA projection for exports of 945 million bushels is about 45 million bushels higher than last year, but it is below what earlier expectations were, so the sales haven’t been keeping pace with what we originally thought we were going to see for the year, according to Olson.
“That’s one thing that’s weighed on prices,” she said.
Another factor weighing on prices is that the hard red winter wheat crop is in good shape. In the latest report, about 60 percent of the hard red winter wheat crop is rated in good/excellent condition. Olson noted that’s stable with the previous week and compares to only 31 percent of the crop rated good/excellent last year at this time.
“Those are some of the highest ratings in recent years, so even with another decline in winter wheat acres there is still potential there for a promising crop,” Olson said. “That continues to put pressure on hard red winter wheat futures prices.”
It’s a completely different story for the hard red spring wheat crop as cool, wet conditions have caused planting delays across the region.
“In the spring wheat area, conditions have obviously been less than ideal for planting,” Olson said, adding that the latest crop progress report on April 15 showed about 1 percent of the crop planted in Montana, but nothing in the other three major states. That is well below the 5-year average of 13 percent.
“But if we look at last year’s data, we were in the same place and had nothing planted at this time and we ended up with a fairly good cop,” she said. “That could be part of the reason why the market hasn’t been reacting to these planting delays.”
As of April 16, Olson felt that most producers in the region were still 2-3 weeks away from field work especially considering the snow and precipitation that fell across the region April 10-12.
“The big question is what will happen with late planting? How big an effect will it have on acreage?” Olson asked. “Overall, U.S. spring wheat acres are expected to be down, but in North Dakota producers were projecting a 2 percent increase so, of course, the question is will that stand with the late spring and lackluster prices?”
Another factor the market is keeping an eye on would be the Canadian spring wheat plantings.
“The thought is that their spring wheat acreage will be higher and a part of that is due to the trade issues they’re having with China over canola.” Olson said. “China is their largest market for canola and so the thought is there will be less canola acres and more spring wheat.”
The market will get a better idea when Canada releases its first planting report at the end of April.
Lastly, U.S. export sales are “not terrible,” according to Olson, and are actually faring better than a year ago, but they just haven’t been keeping pace to meet USDA’s original estimate. Thus USDA keeps lowering its estimate every month.
Total U.S. wheat sales have reached 903 million bushels and there is about 8 weeks left in the marketing year so the U.S. should be able to meet USDA’s current estimate of 945 million bushels, according to Olson.
Looking at just spring wheat, so far the U.S. has sold 250 million bushels compared to 220 million a year ago. The USDA estimate is 260 million for the marketing year which ends May 31.
“So we need a little over a million bushels in sales each week to meet that, which is feasible,” she said. “The tough thing is that at one time we were expecting exports for this year to be 300 million bushels, so we’re not performing as expected.”
Olson pointed to a couple areas, where poor sales are having an impact. One is China where the U.S. has had one small sale this year versus 20 million bushels a year ago. Another is in Japan where sales are down about 7 million bushels on the year.
“We’re doing well in most of our other markets, but with those two markets losing some sales our share won’t be as high as initially thought,” she said.
“The major thing over the next few weeks is to watch planting progress,” she concluded.