Digging into the Wheat of the WASDE
Last Thursday, we got the USDA’s November WASDE report, and while the biggest surprise was the revision of Chinese production and inventories, there are some tidbits worth recognizing.
One of the things that spring wheat prices have already seemed to have price in is the smaller Australian crop. The USDA updated their official estimate, dropping the crop by 1 MMT down to 17.5 MMT, but this is still about 1 MMT higher than ABARES’ official forecast. Other than China though, there wasn’t too much of an update to the wheat production side of things.
Globally, if we don’t count a significant increase in Chinese wheat, the total 2018/19 global harvest was lowered by 1.9 MMT in the November WASDE report. But again, with China, global wheat ending stocks were raised up to over 267 MMT.
On the export side of things, the USDA kept things pretty much the same as last month, including Canadian wheat exports at 24 MMT. This, despite the fact that currently, non-durum wheat exports out of the Great White North are tracking 23% higher year-over-year through Week 14 of the 2018/19 crop year.
The USDA did lower Australian wheat exports by 1.5 MMT from last month to 11.5 MMT. This would be lowest since the 2007/08 crop year. Also, it is lower than the final 2017/18 export numbers from the Australian Bureau of Statistics, which pegged things at 13.8 MMT.
These export expectations are being backed up at the ground level, as most of the ongoing (but smaller) Australian wheat harvest is going into storage. Specifically, on the east coast, GrainCorp had only received 21,000 MT of grain in its storage warehouses through last week. A year ago, more than 500,000 MT had been delivered. This smaller pace of deliveries is expected to continue in the eastern states of the country, where the drought has limited production potential. Conversely, record wheat yields are being seen on the other side of the country!
Staying in the Southern Hemisphere, Argentina’s wheat balance sheet, with 19.5 MMT of production and 14.2 MMT or exports.
Back here in North America, Canadian non-durum wheat exports through Week 14 of the 2018/19 crop year are still tracking 23% higher year-over-year with just under 5 MMT shipped out to date.
That being said, we continue to see relatively strong prices, albeit values have dipped a bit in the past few weeks alongside the futures market. So, if we look at deferred delivery on the PDQ grain pricing website, you’ll note that there is about a 15 cent spread between December and March movement.
In my opinion, this spread is going to be something you’re going to want to watch over the next few months.
President & CEO | FarmLead.com