Spring Wheat

Better than expected progress on the delayed U.S. and Canadian spring wheat crops, as well as slightly less demand, weakened prices as October came to a close.

“In spring wheat, our price strength that we had going into the middle of October has weakened a bit,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “We’re seeing no real big demand coming into the U.S. market or from overseas buying, and at the same time, some tightness for near-term quality needs to U.S. mills seems to have eased a bit, so the market has fallen back some.”

Prices for 14 percent protein spring wheat across the region range anywhere from as low as $4.40 to as high as $5.30 in parts of Montana. The average is about $4.75.

Nationally, current prices at the end of October were around $4.94 per bushel. The peak in mid-October was close to $5.15, so they’ve fallen back about 20 cents.

On a positive note, going into harvest the national price was down to about $4.20, so prices are still running about 70-75 cents higher than the harvest time low, Peterson noted.

“What has driven some of that is about 70 percent of that strength was in the futures and about another 30 percent in basis,” he said. “Now that we’ve seen the futures fell back a bit, we’ll see if the basis can do some more work over the next month or so to try to shake loose some producer wheat.”

At this time, elevators and producers are just focused on trying to get the remaining wheat out of the fields. They’re also making a deeper dive into soybean harvest and waiting for the corn crop to mature.

“That’s what is in the forefront of producers’ and grain handlers’ minds,” he said. “Of course, a lot of the crop is coming in wet, so that adds another layer of logistics in terms of drying some of the crop.”

Peterson also pointed to national issues garnering attention, including the fact there is still some concern on the lagging corn crop. U.S. producers are starting to make some harvest progress with about 30 percent harvested as of late October. However, that compares to an average of 61 percent harvested, so that’s certainly running behind.

In terms of crop maturity, 86 percent is rated mature, so that eases some of the frost concerns, he added. Looking at the North Dakota and South Dakota corn crops, only about 65-75 percent is rated mature, so it’s likely we’re going to see some quality issues in areas and a strung out harvest.

The soybean harvest nationally was at 50 percent harvested. North and South Dakota soybean harvest was only 20-30 percent complete compared to the average of 80-90 percent, according to Peterson.

“I point that out because if there’s not a lot of new news coming into the wheat market, prices are going to take their cues from corn and soybeans, and right now we’re behind, but we’re making some progress on harvest,” he said.

As for hard red winter wheat going into the ground for next year, about 85 percent has been planted, which is ahead of schedule nationally. The only area of concern at this time is in Montana where 87 percent is planted. Typically, that percentage is 95 or higher.

“It’s getting late enough in some of those northern areas that they may not get all their intended acres planted,” he said. “In the south, part of the reason why producers have made good progress is because there are dealing with drought concerns in parts of Texas, Oklahoma and western Kansas, so they could use a shot of rain.”

On the demand side, as of mid-October all U.S. wheat exports totaled 514 million bushels, which is up 12 percent from a year ago. USDA is projecting an increase of only 1.5 percent from a year ago, so it’s certainly good to see the strong early start.

By class, hard red winter wheat is showing the best demand early with 195 MB in sales, which is 47 percent ahead of a year ago. USDA is projecting a 15 percent increase, so this is a pretty notable gain. Hard red spring wheat sales are at 140 MB, which is down 5 percent from a year ago.

“USDA is projecting exports to slip 2 percent, so one of the concerning things with hard red spring wheat is if we look at sales on books that are yet to be shipped, we’re running 25 percent behind a year ago,” Peterson said. “I think that’s a reflection of the sticker shock to buyers with some of the export offers that were being quoted for maintaining last year’s specifications, especially for vitreous kernels, falling numbers, etc., and so it’s probably going to take some time for buyers to fully assess both the U.S. and Canadian crops to see what specifications they can live with.

“Certainly there’s a risk with adjusting specifications, but part of it is quality is going to be tight, so there’s going to be some price premiums, at least that are being offered. I think we’ll see buyers pull to the side a bit to negotiate price and specifications with exporters. Hopefully we’ll get them more lined up as we get into November,” he added.

Looking at world dynamics, Peterson noted that as of now U.S. prices had gotten out of line a little, so with the recent setback the U.S. is starting to get more competitive with exports, especially for hard red winter wheat. The Black Sea region and the European Union are also quite aggressive.

For the two countries left to harvest their crop – Argentina and Australia – both of their current production estimates probably need to be lowered, Peterson pointed out. Argentina has been hit by frost and hail in some areas as well as some drought in western areas, so indications are that their crop will come in a little smaller. Australia has some significant drought concerns.

“One of the dynamics there is there seems to be pretty good internal pull to keep more of the drought-impacted crop home domestically for feed or milling, so that’s elevated their prices,” he said.

Lastly, in Canada producers are still harvesting and the market is still trying to get assessments on their grade distribution.

“They have a bit clouded picture because they don’t necessarily conduct falling number tests for grades, they look at sprouted kernels, and so there’s some debate over what percent of the crop will hold to a 1 or 2 grade, but it’s certainly clear it’s obviously going to be a lot less than the last couple years and more of it going into feed,” he said.

“That’s kind of where we sit as we enter the month of November. There’s still a lot of concern over quality factors, but the market seems to have taken a little bit of a breather just with no major frost or crop loss in corn or soybeans and buyers pulling back a bit on the wheat market,” he concluded.

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