Wet Weather Weaves Wheat Higher
Wheat markets are starting to find some strength as we finish the month of September as wet weather is starting to put some serious quality concerns on the remaining hard red spring wheat durum harvest in North America. This comes as speculators were sitting on a record short position on the Minneapolis spring wheat futures board. This could potentially catalyze bullish moves faster as fund managers look to exit their short position.
Sprouting and bleaching issues are resulting in some buyers of HRS and durum wheat to already have some pretty steep discount schedules. What’s potentially compounding the quality issue is further wet weather through the weekend in North Dakota, Montana, Manitoba and some parts of Saskatchewan. dd in the fact that we’re getting pretty close to normal frost dates, I’m expecting to see protein and quality premiums and discounts to spread even wider. More specifically, parts of central and southern Alberta are expected to see some snow later this week.
As you can tell from the current state of the wheat harvest in Western Canada, there’s certainly a lot of crop left to get combined. Echoes of Harvest 2014 are starting to be heard more as, this time, that year, only 12% of Saskatchewan’s HRS wheat had been combined, while only 8% of the durum crop was in the bin. Similarly, only 23% of Alberta’s spring wheat crop had been combined. It was this year that we saw some pretty significant quality premiums/discounts and I’m expecting this year to be fairly similar in terms of needing to know what you have. To help you, we’ve built a simple cheat sheet to take proper grain samples.
Even if you’re going to have to sell into the feed market, knowing disease levels will be a top priority for any buyer.
Moving into the demand side of things, the International Grains Council is expecting global durum production to fall by 1.3 MMT from last year to 37.7 MMT for Harvest 2019. Most of this decline is attributed to the smaller durum harvest in Canada and the U.S. as production is expected to fall, year-over-year, by 750,000 MT and 540,000 MT respectively. With Canadian durum exports expected to climb by 4% year-over-year to 4.7 MMT, Canadian durum ending stocks should fall 32% year-over-year to 1.1 MMT. Currently, durum stocks in the United States are expected to drop as much as Canada’s, as 1.47 MMT is expected to be held in the U.S. at the end of this crop year, down just 2% year-over-year.
For non-durum wheat, Agriculture Canada is following StatsCan’s line that a higher area of wheat planted this year will be “offset by higher abandonment for winter wheat and lower average yields.” However, this is a similar theme in many major wheat-producing countries, as world wheat production is expected to jump by 35 MMT to 766 MMT, the second-largest wheat harvest ever. With more competition in the global markets, Canadian non-durum wheat stocks are expected to climb 10% year-over-year to 5 MMT, and, accordingly, average wheat prices should dip a bit in 2019/20.
Overall, it’s hard to blame Agriculture Canada for laying out the facts of a globalized market. That said, what the market thought was going to be a year full of high protein wheat to go around, that might not be the case, and so again, I stress to make sure your grain is sampled properly and then tested. The first step to a great grain marketing plan is knowing your cost of production, the second step is knowing what quality you actually have available to sell.
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