Spring Wheat

The past two weeks have brought about a lot of volatility in the spring wheat market. As a result, prices have been like a carnival ride with twists and turns.

“Hard red spring wheat prices continue to be on a bit of a wild ride. Futures prices are still up about 50 cents from the beginning of May, but the [first two weeks of June] have brought about a lot of volatility, so we’ve seen some pretty big swings up and down from day-to-day,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission, adding that cash prices are basically the same as they were at the beginning of June, ranging from $4.75-$5.05.

“A lot of this is fueled by concern with the row crops and the winter wheat crop and also some more potential trade issues,” she added.

Part of it is also that spring wheat planting is basically finished. She said it’s questionable just how many acres didn’t get planted, although she thinks most of that probably affects South Dakota, and maybe southeast North Dakota, as that’s where the major problems were as far as wet conditions that impacted planting.

“Crop development is still a bit behind average, but we’re starting to see things catch up with these warmer temperatures,” she said, adding that about 85 percent of the crop is emerged compared to 93 percent on average.

Crop ratings are pretty high for North Dakota, Montana and Minnesota with anywhere from 82-84 percent rated in good-to-excellent condition. However, in South Dakota only about 70 percent is rated in good-to-excellent condition.

“That obviously makes sense due to those overly wet conditions the state encountered this spring,” she said.

In North Dakota things are getting dry in the northern tier of counties, and the north central region is now classified as a moderate drought area. That dryness extends across the border into Canada where they’re concerned about dry conditions as well.

“We’re still getting some price support from the planting delays of the row crops,” Olson said. “Corn now is at 83 percent planted. Normally, planting would be complete by now. Also, the crop condition ratings are lower than a year ago.”

Also, the U.S. soybean crop is only 60 percent planted which is well behind the average pace of 88 percent complete by June 11.

“This is going to continue to affect the market,” she said. “Of course, the other issue is the winter wheat harvest which is currently behind average. There have been wet conditions that have delayed harvest, but that has also caused concern regarding potential yield and quality losses.”

Then there was the issue of potential tariffs against Mexico. There was a threat that the U.S. would apply tariffs to some Mexican imports which, Olson noted, “obviously would have brought retaliatory tariffs the other direction, so the market was down on that news. However, luckily it looks like the issue was resolved as of June 10.”

Details about the agreement have been limited at best.

“Mexico is on average the second largest export market for U.S. wheat, purchasing over 100 million bushels on average. For the 2018-19 marketing year, they stand to be the largest,” Olson said. “The country is also the largest export destination for corn. So anytime we start to hear issues of potential tariffs, the market reacts quickly.”

USDA released the June World Agricultural Supply and Demand Estimate (WASDE) report on June 11. For spring wheat, USDA increased export projections by 5 million bushels, so the new projection is now at 260 million bushels.

“That does make sense because we were already at 262 million. About 14 million bushels remained unshipped a week ago, so that 260 million figure should hold by the time we get the final data,” she said. “For comparison purposes, last year the U.S. was at 228 million bushels in exports.”

USDA also made some adjustments to the U.S. all wheat numbers, including increasing exports by 25 million bushels to 950 million. But as of the last export sales report, U.S. exports of all wheat were only at 949 million bushels and 60 million of those bushels hadn’t been shipped yet.

“I guess I’m a little unsure if we’ll reach that new number,” she said.

The agency also made a couple modifications to the 2019-20 supply and demand chart. Domestic use was raised 50 million bushels on the expectation of higher feed use. Exports stayed the same at 900 million bushels and ending stocks are projected to decline 3 percent from a year ago.

“The big question mark is going to be production, just with the uncertainty in the winter wheat crop, and of course, the spring wheat acreage and production as well,” Olson said. “Otherwise, around the world, things have been pretty quiet in the wheat industry, but there are still concerns about dryness in Russia and Australia.

“In the near term the market will continue to watch the weather and crop progress reports for not only wheat, but row crops as well,” she concluded.