Spring Wheat, Upper Midwest, Mid-November 2016

For most of the month of October the Minneapolis futures remained in a sideways trading pattern – mostly between $5.15 to $5.30, according to Erica Olson, marketing specialist for the North Dakota Wheat Commission.

“Producers would like to see better prices, but the good news is we’re a lot higher than the lows we saw in August, and prices have obviously stabilized for the time being,” Olson said.

“The other thing is that Minneapolis is at a higher than normal premium to both Chicago and Kansas City and right now is trading a little over $1 higher,” she continued. “This reflects the larger winter wheat crop and the tighter supplies of higher protein wheat.”

Local cash prices for hard red spring wheat are ranging between $4.30 and $4.60, which isn’t likely to entice a lot of producer selling, Olson noted, but it’s an improvement over the previous month when prices were below $4 at some locations.

Now that harvest is over the market has a good idea of the quality of spring wheat crop. Here in the United States the crop was high grading, averaging a #1 Dark Northern Spring, with protein over 14 percent and fairly good milling and baking characteristics.

Canada cannot say the same thing, according to Olson.

“They struggled with disease pressure and rain at harvest time so very little of their crop will make the top 2 grades,” she said. “So when you factor in that, we will start to see supplies of high quality wheat get tighter. Therefor we’re expecting more demand for U.S. wheat.

“In fact, USDA projects total demand at 641 million bushels, which is the second highest level in the last 20 years. And domestic food use is projected at a record 277 million bushels,” she added.

The U.S. export pace continues to be strong in the current marketing year with 183 million bushels sold so far which is up 20 percent compared to a year ago at this time.

Much of that is attributed to strong Asian demand. So far this marketing year exports are up 18 percent to Japan and up 40 percent to the Philippines. But exports to Thailand and China are up even more at 66 and 57 percent, respectively.

The U.S. is seeing a slight decline to Europe and Africa, however; but exports are up 27 percent to the North and South American regions with Mexico, Venezuela and Canada leading the demand.

“This increased demand is due to both a strong quality crop this year, but also because of Canadian quality issues,” Olson said. “Right now we can see Canadian exports are struggling and are down 23 percent on the year.

“The strong demand for spring wheat and the possibility for tightening supplies are positive for prices. But, unfortunately, the large world supplies are weighing on the market. World wide we are still looking at record production and record stocks,” she added.

One thing though, is the Australian crop is having some issues due to frost damage in the western growing region and rain in the eastern region. Those two factors are expected to reduce production as well as the quality of the crop there, according to Olson.

In the U.S., winter wheat plantings were 86 percent complete as of the end of October which is right on with the average.

“The speculation now is that wheat acres will be lower, and if we do see this trend worldwide there will likely be a price response,” Olson said.

“The one last issue affecting wheat prices is the corn and soybean harvest. We’re seeing an extremely strong yielding crop which pressures overall prices,” she said. “But also, those two crops are taking up elevator capacity right now so we wont see a lot of movement for wheat.