The spring wheat market has seen some marked improvement lately, but it’s still too early to say that it has turned the corner.
“It’s probably a little bit premature to say we’ve turned the corner,” said Jim Peterson, marketing director with the North Dakota Wheat Commission on June 8. “But we have seen a little bit of recent uptrend in Minneapolis futures, albeit it’s not a dramatic increase.”
Since mid-May, Minneapolis July futures are up about 15-20 cents and are currently hovering around $5.30 a bushel. Part of that is the technical bounce that took place at that $5-$5.10 range.
“That’s a pretty good support level in futures, but with that said, there’s pretty good overhead resistance at that $5.50-$5.70 range, so we’re going to need more sustained positives to drive the market going forward,” he said. “Some of that will fall into what’s happening with the world crop, as well as our own winter wheat crop.”
Looking at the immediate situation for just spring wheat, the current national average for 14 protein spring wheat is in the $4.90 range, which is up from about $4.73 in mid-May, but down from $5.10 in April of this year and still down from $5.20 of June 2019.
“So certainly we have not turned a corner yet, but it’s a positive to see a little more uptrend. We’ve still got a ways to go to get back to where prices need to be to help cover production costs,” he said.
Looking at the range in prices across the region, they’re down as low as $4.40 a bushel in some areas for 14 protein spring wheat to about $5.20 a bushel in some parts of Montana.
As far as the current situation, there’s still a lot of uncertainty with where final planted acres will end up. For spring wheat, the most recent crop progress report on June 7 indicated 97 percent of the U.S. crop had been planted. North Dakota was at 95 percent planted, while most of the other states are completed with their spring wheat planting.
Peterson pointed out that final crop insurance deadlines in the northern counties of North Dakota was June 5, while most of the rest of the state the date was May 31, so we are beyond the crop insurance date.
“The question is how much of the intended spring wheat acres didn’t get planted and is going to be prevented plant?” he asked. “I’ve seen some estimates for North Dakota this year for maybe a million acres of prevented plant in total. Out of our typical 24 million acres that we plant to all crops, the vast majority of that million was likely intended corn acres. But there’s no doubt through the central/east central part of the state that there’s going to be some spring wheat that’s prevented plant, as well, just because it was too wet to get into the fields,” he explained.
As for the spring wheat that did get planted, emergence was pegged at 81 percent for the national spring wheat crop, as of June 7. The five-year average is 91 percent, so emergence is a little behind. For North Dakota, the crop is 72 percent emerged when typically it’s around 90 percent.
“Eyes will be on North Dakota, as far as the spring wheat crop, because the final acres are more uncertain and the crop is a bit behind schedule in development,” Peterson said.
According to the USDA report, of the crop that has emerged, 82 percent is rated in good-to-excellent condition. So even though it’s a bit late, it looks good on emergence to date.
Other factors that may drive the market, Peterson noted, includes what happens with the winter wheat crop. Thus far, harvest is rolling along quite strong in Texas and Oklahoma, but just getting a good start in Kansas. Texas is reporting 50 percent of the winter wheat crop has been harvested, while Oklahoma was reporting 20 percent complete. Nationally, winter wheat harvest is 7 percent complete.
“I think we’re going to have an early harvest driven by drought and some early spring freezes in Colorado, Kansas, Oklahoma and Texas, and then we might hit a little bit of a lull because in Montana, because of the colder spring, only 5 percent of the crop is headed and in South Dakota only 50 percent is headed and Nebraska just 67 percent. So after that early harvest we may have a little bit of a lull,” he said.
“Regarding the early harvest, there are variable yields and protein trends just due to drought, as well as some of the early frost events, so it’s really hard to get a read on the crop so far and what market impact it will have on spring wheat,” he continued. “Since we are into harvest, winter wheat prices have been declining, so that will keep a little pressure on spring wheat prices, as well.”
As far as other big picture issues, Peterson said the Black Sea region in Europe has faced some periods of dryness, though they have caught some rains lately, which has eased some market concerns. That will be something to watch going forward.
“If those drought headlines get back into the market in June, one would expect to see some carryover support into the U.S. market,” he said.
On the demand side, as of the end of May, overall U.S. wheat exports totaled 992 million bushels (MB) in sales. USDA’s goal for the year was 970 MB, so sales are ahead of projections. One caveat is that there were about 90 MB still to ship out, so actual shipments may fall short of the goal. However, sales did end ahead of a year ago.
Hard red spring and hard red winter wheats showed strong growth over a year ago, Peterson noted, adding that as is the case with all wheat, both classes may still end up just short of USDA’s projections. For example, hard red spring wheat had 294 MB in sales as of the end of May. The goal was 275 MB, but there was still 40 MB yet to ship out at the end of May. Hard red winter wheat sales were 373 MB, which was right on target of USDA’s goal of 370 MB, but there was still 25 MB yet to ship out.
In addition to current crop conditions and winter wheat harvest, and whether some of the drought concerns in parts of the spring wheat region can be eased, the market will also be looking at early 2020 market year demand, according to Peterson.
As of now, the U.S. has been “a bit challenged in the export market” due in part to the strength of the dollar during April and May, although it has weakened a bit recently. Customers, especially in South Asia, Peterson noted, are looking at a better Australian crop this year. Also, in the Middle East – in areas closer to Europe and the Black Sea region – they are looking at better crop prospects there.
New crop sales on the books for overall U.S. wheat currently stand at 130 MB, which is running about 15 percent behind the five-year average.
Hard red spring wheat sales are running 35 percent behind. Hard red winter sales are actually up 12 percent, but most of that is due to sales on books to China and their Phase One commitments.
“Hopefully we’ll see some of that transfer over to spring wheat as we progress,” Peterson said. “I think a lot of our traditional customers are waiting to see if they can get a further price break in the spring wheat market, as well as just to see what happens with the early crop development.
“I would expect new crop sales to increase as we head toward the end of June and early July and we have a more firm idea of what final planted acres will be,” he continued.
“For now we’ll see if the short-term strength we’ve seen can turn into a sustained rally before we hit the seasonal pattern where the market typically sells off.”