Market Insider

Reading Through the USDA’s February Data Dump

Wheat markets continue to trot lower as new market data for both the 2018/19 and 2019/20 crop years are keep any bullish action bottled up in the pen. While there have been some other headlines (namely around the trade war) spurring corn and soybean prices, there hasn’t been much to propel higher prices for wheat markets. That being said, Minneapolis hard red spring wheat prices have been more resilient than its winter wheat counterparts in Chicago and Kansas City.

This past Friday, on February 22nd, the USDA released a ton of data though that helped reset the goalposts (read: fundamentals). This included 2019/20 projections and export sales and shipments throughout the government shutdown, the latter of which we hadn’t really seen any applicable data for more than 2 months!

For sales of U.S. wheat exports, purchases of all classes are starting to pick up, as 21.5 MMT has been contracted thus far, slightly above the 21.4 MMT seen by the same week in the 2017/18. That being said, actual wheat exports (product that’s been physically shipped) has totaled nearly 15 MMT. This is nearly 8% below actual shipments from the same time a year ago.

Digging into specific classes, American exports of hard red spring wheat has picked up over the last few months, now tracking nearly 14% ahead of 2017/18’s pace with 4.66 MMT shipped out.

Finally, U.S. durum exports are tracking about 1/3 hiring that this time a year ago, with nearly 360,000 MT shipped out as of February 14th, 2019.

Like Canadian durum shipments, durum export activity in the U.S. has been very sporadic. Heading up to the Great White North though, with 1.94 MMT of Canadian durum shipped out through the week ending February 17th, 2019, exports are tracking 15% lower year-over-year.

Comparably, Canadian non-durum wheat exports are flying out of the country with 10.1 MMT shipped out through Week 29 of the 2018/19 crop year. This is tracking nearly 17% higher than the same week a year ago.

Switching gears over to the 2019/20 crop year, at their annual AgForum, the USDA said that they think 47 million acres of all classes of wheat will get seeded, down 2% year-over-year. The USDA admits that this number would be lower if had not been for the expectation that U.S. spring wheat acres will rebound significantly in the Northern Plains as producers rotate out of less-profitable soybeans.

With an average yield of 47.8 bushels per acre, this would produce a 1.9-billion bushel crop (or 51.76 MMT), or about 1% bigger than the 2018/19 American wheat harvest. However, the USDA is expecting stronger export competition in 2019/20 as wheat production in Australia and the E.U. rebound. With this in mind, the USDA is anticipating that global demand will support slightly higher prices than we’re seeing today.

This is the datapoint, however, that I think I disagree with the most. We know that more wheat is getting planted in 2019/20 in basically every major exporting country, especially in Canada and the U.S. While I can agree to disagree with the USDA, the market is clearly indicating that it’s looking to a set a lower price floor for the 2019/20 crop year, and the impact is definitely being felt on old crop 2018/19 prices as well. This should be some serious food for thought if you haven’t yet priced any new crop bushels or have more old crop than usual uncontracted right now.

To growth,

Brennan Turner

President & CEO |