Wheat Prices Give Us Something to Talk About
Wheat prices have been trying to find a spark to help push it higher, but the complex seems to be anchored in two major facts: abundant world supplies and a bearish outlook for potentially a bumper crop in the northern hemisphere. More specifically, wheat prices are taking note of the good growing conditions in the Black Sea, as well as the beneficial moisture that the U.S. winter wheat crop is receiving.
The USDA’s crop progress report through April 21st showed us that 62% of the U.S. winter wheat crop is in good-to-excellent condition. This is up 2 points week-over-week and literally double the 31% G/E rating that the American winter wheat crop received at the same time a year ago. As for spring wheat planting, just 5% of U.S. acres have been seeded. This is technically a far cry from the five-year average of 22% but it is in fact better than the 3% seen at this time a year ago.
The critical timeframe that will really the dictate direction for wheat prices will be in May and June though, just ahead of the northern hemisphere’s winter wheat harvest. That said, on the futures board, the spread between old and new crop wheat prices is less pronounced for winter wheat than it is for hard red spring wheat prices. Usually, wheat prices find some strength towards the second-half of May once most of the American and Canadian spring wheat has been planted. These are when the real weather premiums start to show up, which means we might be waiting another month for wheat prices to find any legs.
I mentioned back at the beginning of March when grain markets were wandering that the potential of the 2019/20 wheat harvest was becoming a real threat for wheat prices. My position on wheat prices was timestamped three weeks earlier back in mid-February when grain prices were still focused on a U.S.-China trade war deal being found before the end of the month.
As I’ve said before, the one bright spot for wheat prices might come from the Land Down Undaa! The Australian Bureau of Meteorology is expecting average precipitation across the country over the next 3 months, but soil moisture in the eastern states continues to be a major concern. The problem is, especially in Eastern Australia, above-average temperatures are expected to be realized this calendar quarter, which intuitively means that the growing conditions won't be ideal again this year.
Coming back home, on Wednesday, April 24th, Statistics Canada will release its survey results for Plant 2019 in Canada at 7:30AM CST. We know that there’s likely going to be more wheat planted in the Great White North in Plant 2019, which is also weighing on wheat prices. Going into the report, pre-report estimates of non-durum wheat range from 19.3 to 21.2 million acres, while durum has a range of 4.8 to 6.6 million acres. For comparison, here is what Agriculture Canada Is currently estimating for Plant 2019 by Canadian farmers.
Overall, wheat, much like the rest of the grain complex, needs a major catalyst to get things going. Granted, this is the time of the year when most farmers aren’t selling anyways, but it will at least give you something to talk about after downplaying StatsCan’s numbers and seeing who around you is already in the field!
President & CEO | FarmLead.com