Market Insider

Any Silver Lining for Wheat in the March WASDE?

In last week’s Market Insider column, I talked about some of the hot, dry weather that’s been forecasted for Australia over the next few months (their autumn/fall season), and the bullish implication it might have on spring wheat prices in the long run. Just a few days later, Australia’s crop forecaster, ABARES, made me eat my words as they estimated that their 2019/20 wheat harvest would come in at 23.9 MMT. This would be a 38% jump from this past year’s drought-riddled 17.3 MMT haul. The latter number was actually raised by ABARES by 400,000 MT from their last forecast in December.

The immediate question I’m asking though about this forecast though is “how?”. The weather in Australia is scorching hot and it’s expected to continue for the next few months, and notably in the eastern regions where higher quality & protein is grown. While I learnt a long time ago that wheat can grow in very tough conditions (it’s a weed, ya know!) this dryness is extending into its third straight growing season! How much soil moisture is even left in the Land Down Undaa?

On the export front, ABARES is expecting Australia to export 14.2 MMT of wheat in the 2019/20 crop year. This would be up 41% from the 10.1 MMT they’ve forecasted for Aussie wheat exports for the 2018/19 season. Comparably, on Friday, in the March WASDE report, the USDA kept their estimate of this year’s Australian wheat exports at 10 MMT. In fact, the only major wheat-exporting countries who saw upgrades from the USDA were the EU and Argentina; the latter saw an increase of 200,000 MT to 14.2 MMT and the former by 1 MMT to 23 MMT.

Conversely, the only country to see its wheat exports lowered was the United States, as total shipments estimated for the 2018/19 were lowered by about 3% (or about 1 MMT) from their February estimate to 26.2 MMT. This included HRS wheat exports being felled by 680,000 MT (or more than 8%) to 7.48 MMT and white wheat exports (both soft and hard varieties) getting lowered by 272,000 MT (or about 4.5%) to 5.72 MMT. This, alongside some other demand reductions, led to U.S. wheat carryout increased to 1.22 MMT to 28.72 MMT (or 1.055 billion bu).

Further, Russia’s wheat exports were stayed at 37 MMT but late last week, it was noted that Russia should have plenty of available wheat (about 5 MMT if we’re exact) to continue to be competitive in the international market. Thinking into 2019/20, Russia’s Agriculture Ministry says that the country will expect to harvest somewhere between 75 – 78 MMT in this next year’s wheat harvest of between 75 – 78 MMT. They did optimistically mention, however, that with ideal spring wheat conditions, the number could reach as high as 80 MMT.

Performance-wise last week, Chicago SRW wheat prices lost 15-16¢ (or 3.2% - 3.9%), Kansas City HRW wheat prices dropped 9-14¢ (1.8% - 3.1%), and Minneapolis was down 6-9¢ (1% – 1.6%). Most of these losses were realized earlier in the week though. This is because, despite the WASDE report being mostly categorized as bearish, and given the short position that speculators have been building up, it didn’t seem like there was much room to go lower.

Overall, the March WASDE didn’t really do much to help push grain markets higher. Its bearish nature practically fell on deaf ears as said speculators are already very bearish and are mostly watching for some sort of bullish action on the U.S.-Chinese trade war negotiations. In fact, if you do see a deal made before Plant 2019 starts in the U.S. Northern Plains, it’s very possible that all those once-lost soybean acres that were supposed to get planted into wheat, may go back to getting seeded with the oilseed.

Put another way, there’s no soybean market in places like North Dakota and Minnesota if there’s no demand out of the West Coast. If that returns, so does the likelihood of 2019 soybean acres in these fringe states being closer to what was planted in 2018. In turn, that means less wheat. Thus, if you’re a soybean, wheat, or even canola grower for that matter, you’re hoping some sort of geopolitical risk comes off the table before the drills start rolling in 5-8 weeks.

To growth,

Brennan Turner

President & CEO |