After weeks of lingering without much movement at all, spring wheat prices started to see some improvement in mid-September.
“We have been seeing upward price movement the last couple weeks,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission. “December futures have gone up about 20 cents, so today (Sept. 17), the Minneapolis futures are trading around $5.10. That gets most of the cash bids above $4 with most in the range of $4-$4.50, however some are hovering in the high $3 range still. Obviously, we’d like to see them higher than that, but at least we’re making a little positive progress.”
The big issue right now, according to Olson, is the spring wheat harvest progress and corresponding quality. Producers made fairly minimal progress the second week of September due to rain. According to USDA’s crop progress report on Sept. 17, the U.S. crop was about 76 percent harvested. North Dakota’s harvest was at 73 percent complete, but in Montana harvest was even lower. Normal harvest progress for this time of year is 90-95 percent complete.
Obviously, harvest progress is behind, and compared to the previous week, producers only made 5 percent gains.
“The slow harvest pace is a concern, and so is quality on the remaining crop,” Olson said. “The earlier harvested crop reports indicated mostly good yields, good protein, good test weights and good overall quality, but from the start there have been some issues with lower falling numbers. But that’s very regionalized, so some areas are having no problems and then in some areas it’s a major concern. We’re also seeing some color loss in the crop as well.”
Scientists are currently working on analyzing the spring wheat crop at the North Dakota State University spring wheat quality lab. Thus far, protein levels are good, averaging about 14.6 percent. Test weight is over 60 pounds, but the vitreous kernel content is lower this year at 66 percent, combined with the lower falling numbers in areas.
“Some of that lower quality wheat is going into feed channels, so some of that is not usable,” she said. “I think the big question is: how much of the crop has been affected?
“As we get further through harvest, if we do continue to see quality issues, eventually I guess that could help pull up prices, especially for higher quality wheat,” she added.
Olson noted that in Canada producers are facing the same situation. Harvest is behind average and they’ve also been getting a lot of precipitation. There have been reports there of sprout damage as well and color loss, so there are quality concerns in Canada as well.
“It’s going to take the market a while to asses that whole scenario. But one thing that I think is going to limit the price upside potential is the fact that we have large supplies of last year’s crop still on hand,” she said. “In the U.S., almost half of the 2018 spring wheat crop is still on hand and it’s mostly of great quality.”
On Sept. 12, USDA released its September WASDE report (World Agricultural Supply and Demand Estimate), which had very few changes to wheat. In fact, to the all wheat numbers there were no changes.
“This was seen as somewhat positive because, finally, there’s one month we didn’t see an increase in stocks,” she said.
Within classes, USDA did make some adjustments, specifically to the export numbers. Hard red spring wheat exports were raised 5 million bushels, putting the new estimate at 265 million. Also, ending stocks were reduced by 5 million. However, U.S. stocks are still at a fairly high level historically speaking of 317 million bushels.
On the world side of things, USDA did make some changes. In Australia, which has been dealing with continuous drought for the last two years, production was lowered again by 70 million bushels, down to 700 million. Australia’s export projections were also lowered by 70 million bushels.
The production estimate in Ukraine and Kazakhstan was also lowered by a combined 72 million bushels.
“There are definitely some areas of concern still out there, specifically Australia. They’re just not a lot of exportable supplies this year,” Olson said.
Looking at the U.S. export situation, Olson noted there has been strong demand for U.S. wheat. U.S. spring wheat sales year on year are up 14 percent. Current sales total 123 million bushels. That compares to 108 million last year. Specifically, the U.S. is seeing strong demand from Asia and Central America.
The most recent larger spring wheat sales have been to the Philippines, Korea, Japan, Vietnam and Indonesia. The U.S. has also seen a pretty big year on year increase to Mexico.
Total U.S. sales of all wheat classes combined are also doing well and are up 23 percent on the year.
“For right now, the big thing to watch is the remainder of the harvest progress and to figure out what the final quality is going to show,” Olson concluded.