January WASDE Tries to Reflect New Wheat Trade-Flows
Last Friday on January 10th, the USDA published its monthly world agricultural supply and demand estimates report – AKA the WASDE – and provided updated values that reflect some of the current global trade-flows of wheat. More generally, grain markets seemed to ignore the bearish nature of the corn and soybean data released in the January WASDE, and instead focused on the impending signing of the Phase One trade war deal between China and the United States this week. All in, the wheat complex had a positive week on the futures board.
Kansas HRW wheat prices had the biggest gains last week as some weather concerns are outweighing the decline in acres. Since more winter wheat was planted on the east coast, lifting SRW wheat acres up year-over-year. Conversely, northern and Corn Belt states – those negatively impacted by Mother Nature throughout the growing season but especially during a wet harvest - saw the biggest declines. Combined, winter wheat acres in MI, IL, MO, NE, SD, ID, OR, and WA are projected to drop by 1.2M, or a 13.5% decline year-over-year. Conversely, winter wheat acres in the big 3 – Oklahoma, Texas, and Kansas – will climb by 2.5%, or 400,000 acres to 16M. Overall, U.S. winter wheat acres for the 2020/21 wheat crop are forecasted to be a 110-year low, noted by HRW wheat acres at a new record low of 21.8M.
Looking at the January WASDE numbers for the wheat market, U.S. 2020 winter wheat acres were pegged at 30.804M. This was slightly above expectations, only about a 1% drop year-over-year, but is still a 110-year low. More notably, U.S. HRW wheat exports were lowered by 5M bushels (or about 136,000 MT if converting bushels into metric tonnes) to 385M bushels (nearly 10.5 MMT). That said, 2019/20 U.S. HRW wheat exports are currently tracking 50% higher than compared to a year ago, with 5.5 MM sailed through Week 31.
U.S. hard red spring wheat domestic use was raised by 5M bushels, helped pull back ending stocks by a similar amount. Durum’s carryout was also reduced by 5M bushels, a reflection of exports increasing to 40M bushels (or 1.088 MMT). If you missed it last week on the FarmLead Insights page, see where I think spring wheat prices and durum prices are heading in 2020.
Looking abroad, the USDA lowered its estimate of Australian wheat production again, this time by another 500,000 MT to 15.6 MMT. This is 250,000 MT lower than what ABARES pegged the Aussie wheat harvest at a month ago. Surprisingly, they only dropped exports by 200,000 MT. Russia’s wheat harvest and exports were lowered by 1 MMT, but European wheat exports were raised by 2 MMT, a reflection of the strong pace of shipments so far in the 2019/20 crop year. For example, French soft wheat exports in December reached a 7-year high, and for the year, are tracking 14% higher compared to the same week in 2018/19.
Here at home in Canada, durum exports continue to track well, with shipments up nearly 50% year-over-year with 2.15 MMT sailed through Week 22. Conversely, Canadian non-durum wheat exports have totaled only 6.82 MMT, down about 15% from the nearly 8 MMT sailed at this time a year ago. Given available supplies in the pipeline, I expect wheat price rallies to remain limited on the cash markets. Of course, if exports pick up significantly then we should star to see an improvement, but southern hemisphere supplies (namely from Argentina and Australia) will also keep values in check.
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