AAFC Expecting Less Wheat, More Durum
Recently, Agriculture and Agri-Food Canada came out with its updated forecasts for the 2019/20 crop year and generally-speaking, the outlook hasn’t changed too much for wheat or durum. For the latter, 2019/20 acreage estimates were expanded by nearly 300,000 for a new forecast of 4.94 million acres. From a production standpoint, this equates to a 5.1 MMT Canadian durum harvest in 2019. Technically, this sort of acreage would be a 20% drop from 2018’s 6.185 million acres, while production would fall 11% compared to last year’s 5.745 MMT. Net-net, a bigger-than-once-though harvest, stronger exports on smaller global supplies, but smaller domestic demand puts Canadian durum carryout for the 2019/20 at 1.6 MMT, a 20% decline from 2018/19’s 2 MMT.
For non-durum wheat, AgCanada dropped seeded 2019 acreage slightly from last month’s estimate to 20.38 million, which would still be a 9% bump year-over-year. This is a result of a 4% decrease in winter wheat being more than offset by a 10% increase in spring wheat acres. From a production standpoint, 28 MMT harvest is currently being forecasted, which would be a 8% jump from the 2018/19 haul. The slightly smaller acres/production means that 2019/20 ending stocks are now sitting at 5.4 MMT, a 37% jump from this year’s expected carryout of just 4 MMT.
On that note though, I think that the 2018/19 ending stocks could be lower than 4 MMT, given the pace of exports that we’ve been seeing this crop year. Through Week 33, Canadian non-durum wheat exports have totaled 11.39 MMT, or 18% higher than the same week in the 2017/18 crop year. Right now, AgCanada is only expecting a 7% bump in Canadian non-durum wheat exports. This basically means that, with about 4.5 months of the crop year to go, shipments will have to dip a bit. I don’t see that happening.
Worth mentioning is that Brazil is opening up its doors to duty-free wheat imports of up to 750,000 MT (or about 27.6 million bushels). However, this comes as this year’s wheat crop in Brazil is looking pretty good, not only from a crop development standpoint but also on the balance sheet in terms of farmer profitability. Needless to say, this 750,000 MT window of access will not last long and it appears that the U.S. is really looking to capitalize, especially considering the trade barriers with China and them also not participating in the CPTPP group. That said, U.S. wheat exports are picking up a little bit, with 17.37 MMT (or 638.2 million bushels), now shipped out through Week 41 of its crop year.
I should note that we continue to see U.S. export basis levels for wheat improving as flooding through the Midwest is limiting rail, road, and river transportation. This has been supporting grain prices in general, but most of the market is watching for the USDA’s Prospective Planting’s report on Friday, March 29th. Going into the report, total American wheat acres are expected to fall by 2% from 2018 to the lowest seeded area in a century. That being said, while winter wheat acres are forecasted to fall 4% year-over-year, spring wheat acres are expected to move higher by 5%. Between now and seeding time though, these numbers could easily change as the full extent of the flooding damage is far from realized.
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