Market Insider

Turning Our Wheat Eyes South

Wheat markets worked mostly lower through the first full week of November as farmer selling and outside bearish pressure from corn and soybeans weakened the complex. Also weighing on broader markets was a less-than-enthusiastic WASDE report from the USDA, as the government agency continued their streak this year of creating more questions than answers with their monthly publication.

On Friday, November 8th, the USDA was supposed to release their monthly estimates of world agriculture supply and demand at 12PM EST. Instead, the UDSA’s website crashed and the actual report was released until nearly 20 minutes later. The delay caused further angst amongst grain markets participants, but when the report finally went live, the USDA had lowered U.S. corn yields by 1.4 bushels per acre (bpa) from their October estimate, but soybean yields were stayed at 46.9 bpa. However, despite tens of millions of fields still left to be combined in the U.S., the USDA did not change harvested acres for corn, nor soybeans.

On the wheat side of things, the USDA dropped both American durum and spring wheat production numbers, citing the wet/delayed harvest in the Northern Plains. U.S. hard red spring wheat production was lowered by 1 MMT to 14.2 MMT (down 11% from 2018/19) while American durum output was felled by 110,000 MT to 1.47 MMT (31% below 2018/19). This production reduction in mind, U.S. HRS wheat ending stocks for 2019/20 are now expected to come in at 7.6 MMT, 1.2 MMT below the initial estimate back in July. For durum, the USDA is expecting a carryout of 1.25 MMT, down nearly 400,000  MT from their first guesstimate in July.

Looking international, the USDA raised their estimate of the 2019 wheat harvest in Russia and Ukraine by 1.5 MMT and 300,000 MT respectively. On the flipside, they lowered their forecast for Argentina’s wheat harvest by 500,000 to 20 MMT, while Australia’s was felled by 800,000 MT down to 17.2 MMT. For Argentina, the wheat harvest is just starting up there, with 11% of the crop taken off so far. Bolsa de Cereleas says now that just 15% of the country’s wheat crop is in good condition, down 5 points week-over-week. Further, none of the crop remains categorized as ‘’excellent”. For context, a year ago, 35% of Argentina’s wheat crop was rated good with another 9% ranking as excellent. 

Overall, the North American wheat supply situation has been priced in. Further, with the U.S. winter wheat crop nearly all planted and the market pricing in the remainder of the North American 2019 wheat harvest, most eyes are turning south. The latest headline from the Land Down Undaa was the spread of some wildfires across the state of Queensland. In eastern Australia, dry conditions have worsened and in most places in the region, open fires are banned. Ultimately, for wheat prices to propel higher from here, I’m looking for new demand headlines for North American wheat and other supply headlines from the southern hemisphere. That said, the dwindling supply numbers in the latter could beget the latter!

Finally, I hope you’ll join myself and other ag industry leaders next month on December 11th in Banff, AB at the Prairie Cereals Summit. A great lineup of speakers has been put together, plus it’s held at the incredibly majestic Fairmont Banff Springs! This is the last week to get your early bird tickets so get them while you can!

To growth,

Brennan Turner

President & CEO |