The spring wheat market was kind of a mixed bag as the Fourth of July approached.
“We had a nice rally in May/early June, which was driven by improving U.S. wheat export demand, significant planting delays of corn and concerns of what that final production will be,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.
At certain price levels wheat does compete with corn for feed demand, so corn concerns are potentially supporting greater wheat demand. Also, the wheat market has been reacting to heavy rains that have taken place in the soft red winter and hard red winter wheat regions which have raised disease threats and concerns about overall quality of those crops.
As of June 23, producers were still struggling to harvest this year’s winter wheat crop. In fact, only 15 percent of the winter wheat crop had been harvested. That compares to 40 percent complete by that time last year and about 33 percent complete on average.
Peterson noted that it appears like the weather will clear into the Fourth of July period so producers could expect to see more harvest progress.
“The market has backed off a little bit, but we still don’t know the extent of the quality impact on this year’s winter wheat crop,” he said, adding that producers can expect to see lighter test weight, lower protein and some DON concerns.
He also reported that in Kansas just 5 percent of harvest was complete. Typically that number is closer to 40 percent.
“So there’s a lot to uncover in terms of what impact the rain has had there,” he said. “They could have big yields, test weights are holding in and there doesn’t appear to be much loss in falling numbers.”
Oklahoma and Texas had about a third of its harvest complete. Protein levels were at 10.9 percent which is below the average of 12 percent. Last year’s protein level was 12.3 percent.
“That’s not been unexpected. Strong yields and lower protein have been anticipated. The question is how much is going to hold to milling grades or will be forced into feed channels,” he said.
On the world wheat scene, an intense heat wave was forecast for much of Europe. Peterson said the crop there is still vulnerable to hot conditions so it’s anticipated there could be a yield reduction. The Black Sea region has also been impacted by hot, dry conditions which could moderate production expectations.
In Canada, much of May and early June saw well below average precipitation. A good portion of the spring wheat region there was catching some rains recently and that bears watching as to whether it marks a shift in precipitation patterns.
One issue which is a reflection of the early season dryness concerns in Canada has been a very strong feed wheat market in Canada, driven by slow pasture growth and concerns over early hay crops.
As far as U.S. spring wheat, local cash prices were ranging from $4.70-$4.90 across the region.
“Prices have backed off from their recent peak, but they’re still up from spring lows around the $4.30 range, so it’s positive to see them higher,” Peterson said. “Current prices are still 20 cents below the high we saw in early April however.”
He noted the May and early June rally in wheat values has been more pronounced for winter wheat values.
The current crop condition rating for spring wheat in North Dakota is 75 percent good-to-excellent.
“That’s a pretty strong rating considering the overly wet conditions and planting challenges producers experienced this year, plus the very dry conditions in the northern part of the state,” he said. “It’s pretty remarkable.”
A year ago crop condition ratings were at 77 percent good-to-excellent.
“At this time the market is not too concerned with the crop conditions,” he added.
Around the region Minnesota’s spring wheat crop was rated 83 percent good-to-excellent while Montana was the lowest at only 55 percent good-to-excellent.
Peterson noted the crop is behind normal in development. Only 7 percent of the crop is headed compared to 30 percent on average for this time. South Dakota’s crop development is the furthest behind with just 10 percent headed compared to 40 percent on average.
Minnesota is close to normal at 14 percent while Montana and North Dakota are just starting to reach heading at 0-5 percent.
On the demand side, the U.S. has had a good start out of the gate for overall wheat sales with 233 million bushels in sales on the books already, which is 27 percent ahead of a year ago.
“The winter wheat classes are the early shining stars,” Peterson said, adding that hard red winter wheat, at 95 million bushels in sales, is almost 2.5 times higher than a year ago. “There have been more impressive sales into parts of the world where we’ve struggled, including Algeria, Nigeria, Iraq, Colombia and Mexico.”
Soft red winter wheat sales are 50 percent ahead on sales.
Two classes where the U.S. is struggling is soft white wheat and hard red spring. Early soft wheat sales are off about 25 percent. Hard red spring wheat sales are at 56 million bushels as of June 13. That’s down from 60 million a year ago.
“On a positive note for spring wheat, we are seeing strong year-on-year sales into Mexico, Egypt and Nigeria. Part of the Egyptian demand is for their local pasta market,” he said. “Where we’re struggling is in Japan, Thailand, Korea and parts of Central America.”
North of the border, Canada’s latest sales report through April shows 500 million bushels of sales on the books. That compares to 430 million last year, an increase of 13 percent. Gains in sales have been to Thailand, Korea, Central and South America, Indonesia and, of course, China.
“That’s the biggest reason we’ve struggled on spring wheat sales as Canada has been very aggressive on price,” he said. “If it continues to be dry there they will have to pull back and that would be beneficial to us.”
On a positive note, U.S. imports from Canada are running 45 percent behind a year ago. Peterson said we can expect mixed trends going forward.
“The Fourth of July period always seems to be the fulcrum, whether we march higher or start to sell off. It’s weather dependent,” he said. “The corn crop will struggle because of the late planting and muddy conditions. The market bias seems to be it is easier for corn to go higher than lower. If acreage losses in the June acreage report are significant we may see corn continue to go higher.”
On the wheat side, the final harvest quality for the winter wheat crop will be a big variable in price direction. The development pace and condition of the spring wheat crop in this region will also provide some direction.
“As long as we continue to see some rains and the weather doesn’t get excessively hot, we could have a good crop though not a record yielding crop like last year,” he concluded.