Wheat Markets Regress Alongside Broader Selling
Soft red winter wheat prices in Chicago were the only commodity to find gains this week and it would have been much more positive if it were not for the heavy losses on Friday alongside the rest of the complex. To start this week, wheat prices have continued their sell-off, although it’s alongside all other grains as investors move to the sideline on economic fears of the coronavirus and China not buying more American soybeans (yet!). Specific to wheat, some winterkill concerns seem to be easing, thus supporting the selling.
In Europe wheat markets, French rail and port services have been severely disrupted as a monthly-long public transport strike have left a lot grain shipments just sitting around in a backlog. This could open the door for buyers to switch purchases to other origins like the U.S. or Canada. It’s worth noting that already, U.S. wheat exports (of all types) are sitting at nearly 15 MMT through Week 32, up about 16% from the same week a year ago. Conversely, non-durum Canadian wheat exports remain 16% below last year’s levels with just 7.13 MMT sailed through Week 24 of their 2019/20 crop year.
Conversely, U.S. durum exports are tracking well with nearly 624,000 MT, good for a 89% improvement from the same week a year ago. However, we haven’t seen much activity these last few weeks on the export front so we’ll have to continue paying attention here.
Similarly, Canadian durum exports are performing 46% better than a year ago with 2.3 MMT sailed. For context, it took Canadian durum exporters nearly an extra 3 months to reach that level of shipments during the 2018/19 crop year. We know that Algeria has bought less cereals – including durum – by about 14% compared to a year ago through November, thanks to stronger production amidst their focus on self-sufficiency. That said, Turkey is helping cover the difference, buying more durum from Canada than they have in years past. Contextually though, average cash durum prices in Western Canada remain stuck around that $7.50 CAD/bushel level.
Agriculture Canada put out its first estimate of Plant 2020 acres and in it, they’re expecting to see more wheat (both durum and spring wheat) planted this coming growing season by Canadian farmers. With higher acres and average yields estimated at 39.3 bu/ac, production of durum is expected to jump by nearly 1 MMT from Harvest 2019 to 5.9 MMT in Harvest 2020. For non-durum wheat, production is forecasted to top 28,000 MT, but Agriculture Canada is expecting exports to hit 19.5 MMT, which, if realized, would be a gain of 900,000 MT from 2019/20’s expected 18.6 MMT. Nonetheless, 2020/21 carryout for both durum and non-durum wheat are expected to climb to 1 MMT (+18% YoY) and 5.5 MMT (+10% YoY), respectively. If you’re thinking about locking in some new crop, be cognizant of seasonal price patterns!
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President & CEO | FarmLead.com