Typically harvest progress puts pressure on prices, but fortunately, this year wheat producers are seeing prices move up a little.
“We’re finally seeing some upward price movement,” said Erica Olson, market development and research manager for the North Dakota Wheat Commission. “We’ve seen the Minneapolis futures come up about 25 cents over the last two weeks.”
Olson noted that as of Sept. 1, December futures were $5.46.
“We can look back at the years and remember the times when the markets went up that much in one day,” she said. “It might not seem like much, but with the market having not done a lot lately, that 25 cent boost is obviously a good trend.”
There’s not really one key reason for the price move upward, but there are a few things going on supporting prices, according to Olson. One is that there actually has been an increase in wheat prices in the Black Sea region as they’ve seen a pick-up in demand and U.S. prices are following. There also been some strong demand for U.S. wheat recently.
Another thing is there is some concern over the U.S. corn crop based on conditions and production prospects, and that’s been pulling wheat along a little bit, as well.
“One more thing is we’ve had some fund activity going on in the market, specifically short covering, and that’s been adding to the strength, as well,” she said. “All this puts cash prices at $4.40-$4.90, so still less than ideal, but they’ve gotten a little boost anyway.”
The main thing the market is keeping an eye on is still the pace of harvest. The U.S. spring wheat crop was 70 percent harvested as of the end of August, which is a bit below the average of 77 percent.
“We’ve had good harvest conditions, luckily. It does look to trend a bit cooler toward the end of this week with some chances of rain, so hopefully that doesn’t interrupt progress too much,” Olson said, adding that harvest was wrapping up in South Dakota and North Dakota’s harvest was 60 percent complete.
Olson explained that an average yield is difficult to determine as there have been some areas reporting yields lower than expected and some higher than expected, so it’s quite variable. The current USDA projection is a national yield of 49 bushels per acre, which would be a new record. The new estimate for North Dakota is 48 bushels per acre, which compares to 45 bushels last year.
“The good news is that with the good weather we’ve had very few issues with harvesting the crop compared to 2019 when we had all sorts of problems,” she said. “This year’s crop is coming in with higher protein. We’ve only gotten in about a fourth of the samples in the NDSU quality lab to be analyzed for the crop quality report, but so far the crop is actually averaging 15 percent protein, higher test weights at 61.5 pounds per bushel and strong falling numbers so far. Hopefully that continues.”
North of the border, Canada’s harvest is plugging along, although they’ve had some rains that have disrupted progress recently. There have been reports of fairly good yields there, as well. The Manitoba Sept. 1 crop report indicating that about half of the spring wheat had been harvested, a bit behind average. As of the last week of August, harvest in Saskatchewan was 5 percent complete, but much progress was likely made in the last week.
On Aug. 31, Olson noted that Stats Canada released its July production numbers, which indicated all wheat production at 1.3 billion bushels (BB), which would be the second largest in history. Most of that increase is for durum and winter wheat, however. Spring wheat is up only 1 percent from last year at 953 million bushels (MB), but that’s still the highest in seven years. The agency is projecting a record yield of 54.4 bushels per acre.
“Even though we’ve been hearing of good yields in Canada, some are questioning how accurate the numbers are as in some instances they used satellite imagery for the estimates,” she said.
Olson also pointed out there are still a few production related issues around the world. The European Union (EU) crop is still being downgraded as production is lower because of weather issues there. Recently the EU Commission lowered soft wheat output again, this time by 118 MB, down to 4.2 BB. The market is keeping a close watch on things over there.
The other thing the market is going to be watching is Argentina. The current production estimate is 753 MB, which would be 4 percent higher than a year ago, but a chunk of that region has had very dry conditions and is also dealing with some pest issues, according to Olson.
“They think their yields will be cut quite drastically in those areas and that could potentially affect their overall production so that’s one that we’ll be watching,” she said.
Another positive, specifically for U.S. wheat, is we’ve been seeing good export demand. The sales report for the last week of August indicated 28 MB of new sales. The bulk of that, about 18 MB, was hard red winter wheat, which had big sales to China, Mexico, and others to unknown destinations.
Specifically for spring wheat the U.S. had 5.5 MB in new sales. Big sales were to the Philippines Indonesia, Vietnam and Malaysia.
Total wheat sales are 7 percent higher than a year ago. By class, hard red winter wheat sales are up 5 percent but then soft red winter is down 20 percent. Sales for hard red spring wheat are up 14 percent, while white wheat sales are up 22 percent and durum sales are up 4 percent.
“Obviously that’s good for prices, as well. Hopefully that will continue,” Olson said. “Otherwise, on the wheat end of things, at least worldwide things have been fairly quiet. We’re still watching the northern hemisphere harvest and what those final production and quality numbers look like.”