The spring wheat market continues to draw strength from 2019 crop concerns, primarily with corn and winter wheat. Nonetheless, it is providing a boost in prices.
“The big thing with corn is since May 1 the corn market has been up 60 cents a bushel, so a pretty dramatic run-up in value,” said Jim Peterson, marketing director for the North Dakota Wheat Commission.
One reason for corn values rising is that this is a historically late corn planting season and there’s starting to be a lot of concern over final acres. Even though producers can plant some shorter maturing varieties, obviously they’re going to be giving up some yield and risking a fall frost, according to Peterson.
“There probably does come a point where it will simply be too late and producers will do a prevented plant crop option, which could dramatically cut corn acres in in some pretty high yielding states,” he said.
As of May 20, nationally the corn crop was only 49 percent planted. That’s more than 30 percent behind the normal planting rate of 80 percent. Probably more importantly, the three states where there is concern is Illinois, Indiana and Ohio where as of May 20 only 10-25 percent of their corn was planted and normally they’re at 80 percent by that date.
“That’s been the big catalyst for this rally. The other is just significant rains across the hard red and soft red winter wheat areas,” Peterson said, adding that Kansas had 11 inches of rain over a one-week period in May. Also, the crop is just starting to reach the flowering stage to early heading in some of those states, so it’s pretty vulnerable to wet weather at that time.
“Obviously producers can’t get out to apply fungicide, so there’s starting to be some concern,” he said. “On the other hand, for many fringe areas the rain has been quite beneficial for the crop.”
Looking at the winter wheat crop, nationally the crop is rated 65 percent good-to-excellent which is ahead of last year and probably one of the stronger crop ratings in recent years, Peterson noted.
“We are starting to see some slippage in wheat ratings in the areas where corn planting has also been delayed. The weekly crop ratings in Ohio, Illinois and Indiana have slipped to almost a third of the crop at poor-to-very poor. We’re starting to see disease pressure there and just overly wet conditions impacting the crop,” he said.
Those factors are reflected in wheat prices. Hard red winter wheat and soft red winter has been up 60 cents a bushel since the first of May, which puts it up 20 cents from the first part of March and is one of the stronger prices in 2019.
For hard red spring wheat, prices have been up 45 cents a bushel since May 1, but that’s still about a dime below the March 1 high. Spring wheat has yet to rally quite as much, but the planting season is unfolding into a tale of two planting regions.
“The recent rains have really hampered southern and eastern spring wheat areas. But as you go north, we’re not in a drought because it’s still early, but there’s certainly some spotty emergence in areas because it’s been overly dry, especially in the north central part of North Dakota and along the Canadian border. It’s not enough to really worry the market yet because we are making planting progress. Spring wheat was 70 percent planted as of May 20 compared to 80 percent normally,” Peterson explained.
Peterson said the only state of potential concern for prevented plant acreage is South Dakota where only 70 percent of the crop was planted. Typically planting in that state is complete by this time. Also, there are certainly some wet areas in North Dakota where producers could choose the prevented plant option as well.
“The market right now is anticipating we could lose another million acres from spring wheat March intentions,” he said.
Weather obviously has been the big issue in this last rally. One factor that bears watching going forward, which could have more of an acute impact on spring wheat, is the Canadian prairie region. Producers there are making good planting progress with 75 percent of the crop in the ground, but it’s becoming markedly dry in a lot of areas.
“It’s hard to talk drought when you’re at the end of May and you have frost forecasts on certain nights and you have to wear a jacket, but if the temperatures get cranked up to the 90s or even 80s for a week, there’s certainly going to be some stress in parts of Canada,” he said.
Spring wheat cash bids for producers across the region are $4.75-$5.
“It’s been a nice little rally during planting season, but there’s still a ways to go in a lot of producers’ minds and we’ll see how our crop develops through June,” he said. “Emergence has been slow so we’ll see what June brings, but as of right now all the focus is on what happens with final corn plantings.”
On the demand side, U.S. exports have accelerated some. Canadian supplies are getting a bit tighter and although both the EU and Black Sea regions are having big crops coming on, they have some weather concerns, including some extended dryness which may be propping up their prices a bit.
“We still need to pick it up another notch, but it’s been positive to see us pick up some sales,” he said.
As of May 16, with only 2 weeks remaining in the market year which ended May 31, overall U.S. wheat exports were at 944 million bushels, which is up 8 percent from a year ago. However, there were still 100 million bushels to ship out.
USDA’s export projection for the year is 925 million bushels, so odds are the U.S. probably won’t ship out all of that 100 million, so the projection should hold, Peterson noted.
Hard red winter wheat exports at the start of the year were running almost 25 percent behind a year ago, but they’ve caught up. As of May 16, sales this year are equal to a year ago.
Hard red spring wheat exports are running 15 percent ahead of a year ago with 261 million bushels in sales with 20 million left still to ship out.
“USDA’s projection for the year is 255 million bushels so hopefully we have some pretty good export liftings to reach that,” he said. “I think some slowdown in rail has affected that a little bit.
Hopefully the 2019 marketing year, which started June 1, will be better than this past year.”
Going forward, obviously demand does play a big factor because if the tariff issues come to a resolution that would obviously help the U.S. export position.
“If we could make some spring wheat sales into China, and get a bilateral trade agreement with Japan, that is still critically important,” he said.
But the big story for the next few weeks will be the weather and what happens with final corn acres, and how much disease impact will there be on the winter wheat crop, according to Peterson.
“Also, as I said earlier, it’s not getting a lot of attention now, but I think following the weather in the Canadian prairie region will be critical to market trends over the next two weeks whether we go higher or lower for spring wheat, as well as our northern counties in North Dakota,” he concluded.