September WASDE Doesn’t Do Wheat Any Favours
While wheat futures are trying to rebound to start the second half of September, a dose of reality hit the complex on Friday, September 11th, 2020 in the form of the September WASDE. As wheat prices have seen a healthy improvement since the end of July, larger production and ending stocks number forced a technical selling week in what has been an unseasonal performance to-date on the futures board. Also weighing on wheat is beneficial rains in Argentina, that, according to the BAGE chief analyst, “put a floor under the damage that was being done to wheat yields.”
Being blunt, wheat prices were the unfortunate bearish scapegoat in last week’s September WASDE report on the backs of bigger harvests in Canada, Australia, and even the EU. For Australia’s wheat harvest estimate of 28.5 MMT from the USDA, this nearly matched ABARES’ updated estimate from earlier this week that suggested the crop will nearly double year-over-year. The EU’s harvest was increased by 650,000 MT to 136.15 MMT, while Argentina’s was felled by 1 MMT to 19.5 MMT but I expect that to fall further. From the Black Sea, the USDA didn’t change anything, which was a bit of a surprise to the market, given some of the big yields being suggested out of Russia. Finally, the USDA basically matched the first StatCan estimate, raising the Canadian total wheat harvest to 36 MMT (largely a function of the bigger durum crop in the Prairies!)
On that note, two weeks ago in this column, I talked about where durum prices might be heading in the 2020/21 crop year. Given the prices that we’ve seen trade on the Combyne Marketplace be anywhere between 15% - 25% higher than what was being bid a year ago, it’s hard to argue with this theory I presented. That said, Canadian durum exports aren’t coming out of the 2020/21 gate like how they finished 2019/20, given that, through Week 5, shipments are totaling just 310,000 MT, or about one-third behind last year’s pace through the same period. Comparably, in the U.S., durum exports of just over 213,000 MT through Week 13 of its marketing season is tracking 44% higher than a year ago.
Arguably, the weaker U.S. Dollar, compared to a stronger Canadian Loonie, might be enough to see more international buyers source out of the U.S., instead of Canada. There’s also the reality that international buyers could’ve been loading up on old crop Canadian durum in the previous months and their needs could be largely satisfied for another few months. Nonetheless, durum wheat prices remain strong and I’d encourage you to show the quantity and quality that you’re looking to move next on a Listing on Combyne (with over 80 credit-verified durum buyers on the platform looking for supply, posting your deal on Combyne ONCE is a lot easier than make phonecall after phonecall!).
Ultimately, wheat prices continue to be asterisked by the fact that harvest is near finishing up in most of the northern hemisphere, but is being supported by higher corn prices and ongoing demand for feedstuffs, be it aboard or here at home (as you can tell in the feed wheat prices chart below, we’re close to the point where values start to climb again, at least compared to the last 2 years). All things being equal, given the strength of wheat values today, we may not see as large of a fall/winter increase in prices. Thus, I’m reiterate my call to action from last week’s Wheat Market Insider column to know your cashflow needs through the end of the 2020 calendar year and think about the risk/reward of waiting a few more months for a couple of dimes, versus selling a bit more today.
CEO | FarmLead
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