Wheat Waiting on Weather, New Crop Year
Wheat markets pulled back as the calendar flipped into May on benign weather and wavering demand. On a weekly basis, the wheat complex gave back some ground, but for April, things settled quite a bit lower than where we started the month. The good news is that the techincals are suggesting that we could get some reversals to the upside, as lines of support. Of course, if the fundaments (re: weather) stay bearish, said lines of support can be tossed out the window.
Conversely, if weather premiums do show up, historically-speaking, winter wheat prices tend to top out in the next few weeks, while HRS wheat prices find their highs towards the second half of June (albeit it was the first week of July in 2016!) That said, Canadian wheat prices have been up and down, reflecting some of the changes in the futures market, but also that of the Canadian Loonie and export demand improving slightly.
Comparably, average durum prices across the Canadian prices continue to sit around $8 CAD/bu, albeit I did see some $8.50 and $8.75 trades on our Combyne Marketplace last week. That said, Canadian durum exports are tracking 24% higher than a year ago with 3.63 MMT sailed through Week 38. Interestingly, fresh data from the Canadian Grain Commission indicates that Turkey – and not Italy, Morocco, or the U.S. – has been the largest buyer of Canadian durum through February 2020. At 824,400 MT sailed, that’s 5 times more what was sailed to Turkey over the same 7 months of the 2018/19 crop year!
On that note, Australia’s 2020/21 wheat crop is expected to rebound 50% over 2019/20 as beneficial and widespread rainfall in early 2020 increased growing prospects following the country’s three years of drought. Soil moisture levels have rebounded, and wheat planted area is expected to jump 2 million hectares (4.94 million acres) from last year to 12.1 million hectares (29.9 million acres) this year. Accordingly, total Aussie wheat production is forecasted by the USDA office down there to reach 23 MMT.
Elsewhere, Ukraine’s Ministry of Agriculture said that they expect their farmers to produce 24.5 MMT in the 2020/21 crop year. This is a 2.2 MMT reduction from their previous estimate and, if realized, would be a 16% drop in production from the 2019 wheat harvest in Ukraine. From a shipment standpoint, the USDA’s attaché in Ukraine is estimating that the country will export 18.1 MMT of wheat in the 2020/21 crop year, down about 7% from the record 19.6 MMT expected to sail in the current crop year.
Next door in Russia, they’re forecasted to get some good rains this week, which adds to some of the aforementioned bearish pressures. That said, while the dry conditions in major Russian wheat-growing areas could still make their bullish mark on yield monitors in a few weeks, new crop wheat prices in Russia (and elsewhere) remain well below that of old crop. Put another way, the world’s wheat buyers are anticipating a large 2020 wheat harvest. For perspective though, the international Grains Council did lower its estimate of global wheat production in 2020 by 4 MMT to 764 MMT, which would basically equal 2019 global wheat output.
Finally, in the weekly USDA crop progress report (out the first business day of every week), hard red spring wheat acres were claimed at 29% planted as of Sunday, May 3rd. That is ahead of what the market was expecting, but still behind the 5-year average of 43%. Also, keep in mind that this average was pulled down by last year’s wet spring, as just 14% of HRS wheat acres in the U.S. were planted as of this week, one year ago! As a reminder, their next WASDE report will be released on Tuesday, May 12th, and in it, we will get the first official estimates for the 2020/21 crop year.
CEO | FarmLead
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