Market Insider

Wheat Prices Hitting Seasonal Highs?

As we moved into the second half of February, wheat markets started to pull back a bit from some of the recent highs made earlier in January on weaker cash prices on the international market and some bearish technical signals. That being said, on domestic front, we’ve also seen wheat prices pull back a bit. This despite, 2018/19 Canadian non-durum wheat exports tracking nearly 17% higher year-over-year, with 9.81 MMT shipped out through Week 28!

Conversely, durum prices in Western Canada have continued to their incremental climb, now sitting an average of $6.56 CAD / bushel through the middle of February. That being said, demand seems to be coming slowly but surely, albeit durum exports are tracking 18% lower year-over-year, with 1.85 MMT shipped out of Canadian ports through Week 28 of the 2018/19 crop year.

On the international front, Algeria’s purchase last week of 600,000 MT of milling wheat was for about $15 USD / MT cheaper than what they bought for back in January! With wheat prices contracted at $247 USD / MT delivered into Algerian ports (or $6.72 USD and $8.90 CAD per bushel) this has forced European, namely French, wheat prices lower to get the business.

In turn, this is forcing cash wheat prices in other markets also lower. In fact, AgriCensus is reporting that 11.5% protein milling wheat from Russia is now competitive with French wheat of similar quality on a FOB port basis at $233 USD / MT (or $6.34 USD and $8.39 CAD per bushel). Furthermore, Russian wheat prices for 12.5% protein have dropped about 12 USD / MT (or 33¢ USD and 43¢ CAD per bushel) in the past week or so. The decline has been mainly attributed to less offers coming to the market, but a weaker Russian ruble has kept things competitive.

Coming back to North America, Informa put out some fresh estimates for Plant 2019, suggesting that the area across the United States seeded with corn will come in at 91.6 million acres, up 100,000 from their previous estimate. Comparably, Informa’s soybean acreage estimate was lowered by 200,000, down to 86 million (Today, I’m still sitting at 84 million acres). For wheat, Informa thinks that total wheat acreage for the 2019/20 crop year in the U.S. will be 46.8 million acres, down 400,000 from their previous estimate.
Worth noting is that later this week, on Friday, February 22nd, we’ll get a first look at the USDA’s first estimates of the 2019/20 crop. They’ll also be releasing U.S. grain export numbers for the past number of weeks that the USDA has been trying to catch up on since the government opened back up in late January.

Overall, the corn and soybean prices seem to be tracking the direction of trade war talks more than anything else, whereas wheat prices are sticking to the fundamentals. The simple question to ask (and answer) is where or not the highs of the wheat market been found? It’s hard to perfectly predict a top but knowing that there are a lot more wheat acres getting planted in 2019.

This includes Australia. That in mind, ABARES dropped its estimate of the 2018/19 wheat harvest by 200,000 MT to 17.3 MMT. This continues to support the narrative that less wheat will get exported out of Australia, something that Canadian exports seem to be taking advantage of. The only question though is will the international market for higher quality/protein start to pull back like we’ve seen in the lower quality/protein. My gut says yes.

To growth,

Brennan Turner

President & CEO |