Flipping the Focus on Wheat
Recently, Statistics Canada gave us their estimates for 2019 acres in Canada and the most obvious numbers were canola acres dropping a bit but wheat acres going up. As you can tell in the below table, every category of wheat is expected to see more area planted except for durum. Since I’ve talked about the expected increase in wheat acres many times in the past few months, this should really come as a surprise to anyone! That being said, it has been a bit dry in Saskatchewan and Alberta, a topic that we’re starting to hear in a few other major wheat-producing areas.
In fact, last week, the International Grains Council bumped up its estimate for the 2019/20 global wheat harvest by 3 MMT to 762 MMT. This is precariously close to the record set in 2017/18 of 763.2 MMT. Certainly contributing to this is China, as the USDA’s attaché in Beijing just raised their production forecast to 131 MMT as higher yields are expected to offset some slightly lower acres there. Further, they are expected China’s wheat ending stocks for 2019/20 to jump nearly 10% from the previous year to 150 MMT (mainly due to reduced domestic demand). As China’s wheat inventories account for about half of the world’s supplies, it’s no surprise that the USDA’s next WASDE report on Friday, May 10thwill include a column for “World minus China”.
Flipping over to Europe quick, Strategie Grains just dropped its estimate for the 2019/20 European durum harvest to just under 7.9 MMT. This would be the lowest durum production volume for Europe since the 2014/15 crop year, namely because of less acres planted and dryness spreading across the major producing regions of France, Italy, and Spain. That said, soil conditions in Germany are also relatively dry, even being categorized as severe. As indicated in the map below by the red and dark red areas, last year’s summer dryness is carrying over into this year’s crop conditions. However, most of the trade has been ignoring this dryness as good weather in the Black Sea is setting things up in that region for another bumper harvest.
While there seems to be more wheat coming down the pipe in 2019/20, there’s certainly been a healthy amount of demand for 2018/19 production. Canadian non-durum wheat exports through Week 38 are tracking 15% higher year-over-year with 13.2 MMT shipped out. Barring a significant geopolitical turn of events, it seems more and more likely that Agriculture Canada’s target of 18.7 MMT for the whole of the 2018/19 crop year will be eclipsed.
Comparably, both U.S. hard red winter wheat exports and soft red winter wheat exports have picked up considerably over the last few months. Through their week 46, SRW wheat exports are tracking nearly 30% higher-year over-year, but HRW wheat exports have been dealt with some tougher competition, now tracking nearly 18% behind last year’s pace. Worth noting, however, is that new crop Russian wheat prices are literally $30 USD/MT (or about 82¢ USD and $1.10 CAD/bushel) cheaper than what current U.S. new crop winter wheat prices are sitting at!
Of course, we’re at the time of year where the flip-flop between old and new crop grain prices is continuous so it’s worthwhile to ignore the noise where applicable. For example, if you’re sold out of old crop, why bother looking at old crop wheat prices? Getting into the growing season, there’s a lot of different things trying to get your attention; I would literally encourage you to write down and prioritize the market factors that could matter to your bottom line the most (Hint: I’ve listed a few above!).
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