Spring Wheat

After a somewhat difficult growing season, the year was drawing to a close on a positive note for spring wheat producers.

“In the spring wheat market we have actually seen some pretty positive price trends through the middle part of December, in some cases a 20-30 cent per bushel appreciation in values,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “As we hit Christmas we were starting to see some sell-off in the futures. Nonetheless, from the first part of December to the middle of the month the national spring wheat index went from $5.01 to $5.30 a bushel.

Across parts of Montana, values for 14-protein spring wheat ranged anywhere from $5.10 all the way up to $5.60 a bushel. In North Dakota, producers were seeing some bids that are still right near the $5 level – at $4.95 to a high of about $5.30 a bushel.

“As we anticipated, we are continuing to see further upward momentum on cash basis levels, meaning they have been getting closer to par with the futures,” he said. At harvest time a lot of locales in western North Dakota were more than $1 under the futures. Now, some of those same locales are probably only 30-40 cents per bushel under the futures.”

What’s driving it is, in part, due to slow producer selling. As soybean harvest is wrapped up and corn harvest is still ongoing, it seems a lot of producers now are content with just letting the corn crop sit out in the fields.

“We’ve kind of reached a point where I think some of the trade is interested in handling wheat,” he said. “Again, we are starting to get some customers lined up with some purchases. Farmer selling really hasn’t been robust, so I think there’s a need to encourage more producer selling.”

On Dec. 10, USDA came out with some revised supply and demand numbers. Perhaps the biggest adjustment was they further reduced the wheat crops in both Australia and Argentina, which are the last major countries to harvest for this marketing year. Production in each country was lowered by 1 million metric tons (37 million bushels) or 5-6 percent from their previous estimate which, Peterson noted, is pretty significant. USDA also decreased the Canadian spring wheat crop by 2 percent.

On the flipside USDA raised the Chinese crop by nearly 2 million metric tons (74 million bushels), which offset the reduction in the other countries.

“Nonetheless, it did open up some potentially better export opportunities for the U.S. in parts of South America as well as South Asia,” he said.

USDA did raise U.S. export projections by 25 million bushels (MB), and also raised Russian exports by 20 MB. USDA offset those with reductions in export projections for Argentina, Australia and Canada by 80 MB.

“Within the U.S. situation specifically, with the increase in exports, the reduction in imports, our ending stocks trended lower so as of June 2020 we should have our smallest level of stocks in five years, so that’s certainly a price positive going forward,” he said.

By class the biggest adjustments were in durum and hard red spring wheat. The reason for that is lowering imports and raising exports at the same time. Hard red winter also got some positive adjustments just with a higher export projection, according to Peterson

At this point, USDA is projecting U.S. exports for all wheat will reach 975 MB, which would be 4 percent higher than last year. The current U.S. sales pace is 7 percent ahead, so the U.S. is still ahead of USDA’s projection. The U.S. has 654 MB in sales on the books to date and that compares to 610 MB a year ago.

Hard red winter wheat continues to perform the best with sales 30 percent ahead of a year ago. Hard red spring is running 4 percent behind with 184 MB in sales compared to 190 MB last year.

“With the recent adjustments by USDA, we’re projected to be equal to a year ago, so obviously we still need to see our sales for hard red spring wheat pace pick up in the next month or so,” he said. “But the overall trend in U.S. exports has been quite positive to date.”

Looking at Canada, due to their late harvest, and probably some of the higher prices for higher quality and grades of wheat, Peterson noted their export shipments of spring wheat are running at 195 MB compared to 235 MB, or about 17 percent behind a year ago. Canada’s spring wheat exports to the U.S. at 5.5 MB are only about half of the 10 MB they shipped to the U.S. a year ago.

“With some of the recent strength in prices we may have seen a bump in producer sales,” he said. “Going forward, I think the things that will continue to impact the market are further confirmation of the China trade deal and, more specifically, actual commitments and purchases rather than just rhetoric from China or the administration, that we’ll actually get some hard sales on the books.

Another thing would be monitoring the winter wheat crop in both Russia, as well as parts of the U.S. There are some very dry conditions in some of those regions so there is some concern going into the winter, he noted.

“The other thing would be producer selling pace versus the expectation of an increase in Asian customer demand for spring wheat over the next couple months,” he said. “We’ll see what happens.”

Peterson also noted that Pacific Northwest export prices are still about 14 cents a bushel higher than a year ago, whereas local prices to growers are still 20 cents lower than a year ago.

“So there’s still some discrepancy between the actual offered values at the ports versus what is being paid to producers,” he said. “We’ve certainly seen that narrow from what it used to be earlier this fall, but it would be nice to see more of that premium coming back to the local level. I think if we get more sales on the books we’ll see more of that transmitted back to local producer prices and basis.”

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