As planting continues to progress across the Northern Plains, the spring wheat market has shown signs of getting a bit stronger.
“We have seen a little strength over the last few days, which is a positive,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission.
The Minneapolis futures price for July dropped down to nearly $5 the first week of May, but then bounced back the following week to around $5.25.
“I would love to say that was the low, but there’s too much uncertainty in the market right now,” she said, adding that cash prices are between $4.35-$4.70 per bushel.
The market is also keeping a close watch on planting progress, which to date, is slightly behind last year’s planting pace and well behind average. There wasn’t a lot of progress made in the first full week of May due to cool temperatures, as well as some rain and even snow in some areas. On the day Olson provided her report, May 12, conditions looked to be warmer and drier, so hopefully producers will be able to turn things around quickly.
Nationally, about 42 percent of the U.S. spring wheat crop was planted, according to the most recent USDA crop progress report. That’s about 20 percentage points behind the five-year average, but still slightly ahead of last year’s very slow pace.
Spring wheat planting progress has been slowest in North Dakota where only 27 percent of the crop has been planted. That is well off the average of 56 percent for this date.
“We only progressed 12 percentage points from the previous week,” Olson said.
South Dakota planting progress is furthest ahead at 75 percent planted.
About 16 percent of this year’s crop has emerged, which is well behind the average of 30 percent for this time.
“But as we all know, as we get a string of good weather conditions producers can catch up fast,” she said.
Producers in Canada are facing a similar situation as their U.S. counterparts in the Northern Plains with cooler weather conditions and planting just getting started. Stats Canada only released its spring planting intentions report the first week in May. That report held no surprises with the agency pegging acreage for 2020 at 18.8 million acres for spring wheat, which is about steady with last year.
There were slight increases for durum and winter wheat in the report.
In its May WASDE report (World Agricultural Supply and Demand Estimate), USDA made a few changes to 2019-20 numbers before it gave its first production and outlook numbers for 2020. USDA increased domestic use by 7 million bushels (MB), which was due to higher flour consumption lately. USDA also reduced exports by 15 MB, putting the new projection down to 970 MB due to declines in hard red winter and hard white wheat export sales.
“At the end of the day ending stocks got bigger by 8 MB,” she said.
Looking specifically at hard red spring wheat numbers, USDA increased domestic use by 7 MB, so ending stocks for that class went down from 250 MB to 243 MB.
Getting into the projections for 2020-21, Olson said the numbers “would be considered slightly bearish for wheat in terms of demand and stocks.” USDA is forecasting 3 percent lower production for U.S. wheat for this year, projecting the crop at 1.87 billion bushels primarily due to lower yields projected for winter wheat.
“It’s very early this time of year and USDA will continue to change the projected yield, but right now the yield is estimated at 49.5 bushels per acre. That compares to 51.7 bushels per acre last year. They don’t separate these numbers by class until July, but they do give a winter wheat projection,” she said. “If we extrapolate for spring wheat and durum, there is a small decline in production forecast for those classes.”
In the supply and demand numbers, domestic use is down 3 percent with higher food use, but lower feed use due to low corn prices and high supplies of corn.
Exports are forecasted to decrease by 20 MB from last year down to 950 MB. That’s due to increasing world wheat production and more competition.
“The demand numbers are not too price positive,” Olson said. “Ending stocks are expected to decline from 978 MB to 909 MB, which is a positive. The price outlook for U.S. wheat is not changing, as USDA is projecting an overall average price of $4.60.
“USDA is anticipating higher world wheat production and higher demand, but still higher ending stocks. In fact, they’re expecting ending stocks to increase by 5 percent to a record 11.4 billion bushels,” she continued.
“None of these numbers are really price positive for wheat, but it’s still very early. For example, the world outlook, they’re forecasting an increase in production for a lot of the major producers including Argentina, Australia, Canada and Russia, and we know that can change quickly,” she added.
There are a few worldwide concerns the industry has been watching lately, including the fact there are a lot of the dry areas in Europe and the Black Sea region. Those areas have gotten rain so that has alleviated some concerns.
“There are also concerns about freeze damage to the hard red winter wheat crop, but we likely won’t know the full extent until harvest time,” she said. Also, the delayed planting of the spring wheat crop will continue to be watched.
Looking at current export sales, the most recent report came in a bit lower than the previous week. Olson noted the U.S. had 14 MB of new sales, with spring wheat accounting for just over half of those with the largest buyer being Vietnam, the Philippines, Japan and also a fair amount was listed as unknown at this time.
“So there’s still good demand. Spring wheat sales were up about 11 percent compared to a year ago,” she said.