Reports Leave Bearish Cloud on Wheat Markets
On Friday, June 29th, grain markets got a lot of information all at once. Apart from the ongoing trade war issues, this was due to Statistics Canada releasing its updated estimates for Canadian planted acres, while the USDA also gave further visibility on grain stocks as of June 1st, along with their own update on planted acres in America. Specific to wheat, we saw some notable changes.
In Canada, StatsCan says that farmers planted 17.3 million acres of spring wheat in 2018/19. This was down by 5%, or nearly 1 million acres from the March estimate of 18.24 million acres that StatsCan initially had been forecasting. Compared to the five-year average of 17.04 million acres, the estimate for Canadian spring wheat acres is 1% higher, but it is 9% higher than last year’s 15.8 million acres.
With harvested acres usually coming as 97% of planted acres for Canadian spring wheat, and assuming a slightly below the five-year average yield of 44.3 bushels per acre, this means we could see a total 2018/19 harvest of 21.7 million tonnes. This would be about 2% below last year’s crop of 22.2 million tonnes. Ultimately though, the crop is far from being in the bin, but this is one of the goalposts that we’re going to use going forward.
For our American neighbours, the USDA pegged total spring wheat acreage at 13.2 million acres, a figure that was quite a bit higher than the 12.431 million acres projected by trade analysts. This is also 20% higher than the 11 million acres planted last year, and 575,000 acres above the March Prospective Plantings report’s number.
A few key stats that showed significant changes in estimates included the following:
· North Dakota: +23% year-over-year to 6.6 million acres;
· Montana: +18% year-over-year to 2.95 million acres;
· Minnesota: +38% year-over-year to 1.6 million acres;
· South Dakota: +8% year-over-year to 1.05 million acres.
Compared to the March Prospective Plantings report, North Dakota saw its spring wheat acreage number climb by 200,000 acres (or 3%). Comparably, Montana’s number went up by 450,000 acres (or 18%) from the March to June report.
On the inventory side of things, there was no specific numbers on spring wheat, but all wheat stocks in all positions on June 1, 2018, totaled 1.1 billion bushels. This is down 7% year-over-year and pretty much in line with what the market was expecting in this report. Breaking it down, 130 million bushels of the wheat is considered to be stored on farms, down 32% from a year earlier. Off-farm stocks, at 970 million bushels, are down 2% from a year ago.
Overall, the market is certainly feeling the pull of some bigger acres, decent crop conditions, and last but not least, trade war issues. Who fills what chairs when the music stops is very much up in the air right now. While it’s certainly a positive that South Korea has opened their doors back up to Canadian wheat after the GMO find a few weeks ago, Japan is a very important market as well (to the tune of about 3 million tonnes every year). It’s starting to feel like the worst is behind us though, and the chips are starting to fall into place. This doesn’t mean wheat prices are going spike 20% over the rest of the growing season, but it does mean that we have potentially seen the lows.
President & CEO | FarmLead.com