Market Insider

(Already) Reacting to Plant 2019 Implications

In this week’s Wheat Market Insider, we’re starting in durum. The USDA’s attaché in Algeria says that soil moisture conditions are sitting above average, and combined with average temperatures, the outlook for this year’s crop is relatively favourable. Total grain acres in the country are pegged at 8.77 million acres, a 3% jump year-over-year, but we know that durum and barley acres are expected to increase this year, thanks to more profitable returns than common wheat.

Part of the increase is due to some government support as Algeria is currently entering its second year of its goal of becoming more self-sufficient in durum and pulses, and the impact is being felt by Canada. Up until this year, Canada’s share of durum imports by Algeria had been growing steadily, from 42% just five-years ago to more than 64% in 2017/18, shipping them 1.148 MMT. However, through February, CGC data shows that Canada has exported only 140,400 MT to durum to Algeria in all of 2018/19! This is down 75% from the 540,900 MT delivered by the same time a year ago! Other notable destinations for Canadian durum include (data for the 2018/19 crop year through February 2019):

·      Italy: 249,000 MT (tracking -13.4% year-over-year);
·      Morocco: 442,800 MT (-19%);
·      Japan: 121,000 MT (+9%);
·      Turkey: 166,300 MT (+70%); and
·      United States: 396,600 MT (+12%).

Total durum exports are picking up a little bit, with 2.58 MMT now shipped out through Week 36, which is about 7.2% behind last year’s pace. Average cash durum prices for spot movement are getting closer to values last seen in August 2018 but have been relative stagnant. A few more good weeks of export activity might be able to boost prices in May, when, as the chart below shows, we tend to see a bit of seasonal support.

Switching into hard red spring wheat, average cash prices across Western Canada hit a seven-month low before rebounding a bit on some weather concerns. Snow and rain hit most of America’s hard red spring wheat areas last week, especially in Minnesota and South Dakota where blizzard conditions are sure to push back planting timeframes. In fact, through this past Sunday, the USDA reports that just 2% of the U.S. spring wheat crop has been planted, well behind the 5-year average of 13%. Moreover, by this week in April, we usually see 30% of the South Dakota spring wheat crop seeded, 11% of Minnesota’s acres planted, 10% of the Montana crop in the ground, and 5% of North Dakota’s spring wheat acres drilled in. This year, out of those 4 states, just Montana has 1% seeded. So, yeah, you could say things are a little bit behind schedule.

This intuitively has some implications on U.S. acreage estimates but we must play the game in front us, not the one we’re hoping for. While it’s likely that U.S. spring wheat acres could fall, there’s speculation that Western Canadian farmers could easily make up for it. More specifically, the fall in interest by Western Canadian farmers to seed canola means total canola acres falling by as much as 10% (or about 2.2 million acres) from their current forecast. Right now, it’s likely that any lost canola acres will go into cereals, flax, or peas.

Ultimately, just like I said last week, now is the time to determine a plan for what you’d be looking to sell old and/or new crop wheat at. If you have something written down now (when you’re a bit more level-headed), if markets do rally, you won’t be forced to just “react” ad hoc during seeding time when you’re already being pulled in 10 different directions!

To growth,

Brennan Turner

President & CEO |