Recapping February 2018 Wheat Prices
Durum wheat prices couldn't replicate the success of winter wheat across North America. But a number of different stories are having a significant impact on prices. First of all, there’s wide speculation that there will be more durum acres planted in both Canada and the U.S. this year, namely because of the Indian import taxes on peas and lentils. Second, Italy continues to be a dud when it comes to buying Canadian durum, which is keeping prices generally below $7.50 CAD / bushel (although there have been some one-offs trade above that on the FarmLead Marketplace). That being said, most elevator bids close the month of February closer to $7 CAD / bushel, down more than 4% for the month.
For both durum and spring wheat prices, growers continue to be cognizant of the 2018/19 production potential given the drier conditions. Also, the signing of the TPP free trade agreement will likely help more spring wheat get exported into Pacific Rim markets, especially Japan. For February though, spring wheat prices on the Minneapolis futures board did nothing, ending the month 0.2% below where it started. On the cash side of things though, we saw Western Canadian spring wheat prices rally nearly 5% with $7 CAD / bushel trading in more than a few locations in the month of February.
While not a lot of Western Canadian farmers are winter wheat growers, they should be mindful of what the prices are doing. It was a long-deserved month for winter wheat farmers, who have been looking for prices to tick higher. Russia’s surging production and exports have weighed on global wheat prices for months. But a combination of bullish factors has pushed Chicago and Kansas City red winter wheat prices higher. U.S. acreage is sitting at lows not seen in more than 100 years.
Kansas City May HRW wheat prices closed the month up 8.7%. Chicago SRW wheat prices for May 2018 topped $5.00 for the first time since August 2017 and gained 7.2% for the month. CPS wheat – which closely associates with winter wheat because of comparable protein quality – gained 7.8% on the cash market in February.
The higher prices for lower protein wheat was influenced by a few things. Domestically, in Western Canada, feed grain prices certainly improved over the month of February, namely because feed barley is dealing with some strong domestic AND international demand. However, beyond that, quality concerns are moving to the top of the list as markets eye the ongoing drought across the United States. Good-to-excellent ratings for the U.S. winter wheat crop is sitting at 4% in both Oklahoma and Kansas – two of the largest winter wheat-producing states.
Thus for low-protein product, there’s still a lot of it in the market. However, low protein prices have rallied while high protein (i.e. 13.5% hard red spring wheat product) has stayed relatively mute. Specifically, the spread between the two on the futures board has narrowed from the $2 USD / bushel a few months ago to less than a dollar today. Overall, there’s a lot of bullishness going into March, but we remain cognizant of the amount of wheat in the world and managed the downside risk accordingly.
President & CEO | FarmLead.com