Wheat Prices Rebound, But for How Long?
Wheat prices were able to rebound last week, mainly thanks to a big performance on Wednesday by Chicago SRW wheat that saw gains of nearly 30 cents. For the week, it did close about 20 cents higher, with the May 2019 contract finishing at $4.62. Here’s a look at how the wheat markets on the futures boards performed for both their front-month and new crop contracts last week.
Worth noting is that international demand for high protein continues to remain relatively strong. Non-durum wheat exports from Canada are tracking 20% higher year-over-year with 10.9 MMT now shipped out through Week 32 of the crop year. Comparably, US HRS wheat shipments are tracking more than 16% higher year-over-year with 5 MMT shipped out. I’m expecting this trend to continue as global higher protein supplies are still limited in places not named America or Canada.
However, this does not mean that wheat prices should pick up significant steam in the weeks and months ahead. In fact, it’s around this time of year that we see the usual questioning of next year’s acres and potential production. Nowhere is likely more prevalent than in the durum market, which is starting to see a reversal from its slow-moving, 50¢CAD/bushel “rally” over the past 3 months.
Earlier this month, Algeria bought some durum for a delivered April price of about $285 USD/MT (or $7.75 USD and $10.35 CAD per bushel). This is a hard departure from the nearly $300 USD/MT paid at this time a year ago by major importers like Algeria and Tunisia. Unless you’re living under a rock, durum prices have certainly been weaker for the 2018/19 crop year, but the highs of this year appear to be in. So far this crop year, Canadian durum shipments are tracking 16% below last year with 2.1 MMT shipped out.
Comparably, US durum is one of the more expensive in the world, yet exports are tracking 30% higher than last year.
The recent reversal in durum prices is likely to do with the fact that the market is now pricing in current growing conditions in early durum-harvesting countries like Mexico and players in North Africa, namely Algeria and Morocco. Weather has been relatively okay in these areas and as such, the next logical growing region to look to is North America. Early expectations are that we’ll see durum acres drop by around 15% - 20% in both Canada and the United Stated. For perspective, last year, these 2 countries saw about 8.25 million acres of durum seeded in 2018, with Canada accounting for almost 6.2 million acres of that.
The USDA will share its forecasts for durum and other crop planting intentions on Friday, March 29th. Meanwhile, we won’t get a report on 2019 seeding intentions from Statistics Canada until Wednesday, April 24th. Overall, over the next 2-3 months the market will act a bit more sporadically in spring wheat prices than durum, namely because of the greater influence the futures markets will have on the former. Keep in mind today though that the market is expecting more spring wheat and less durum acres in 2019.
President & CEO | FarmLead.com