Market Insider

Where’s The Wheat?

Wheat markets continue to light the lamp for farmers on most elevator bid sheets. The focus continues to be on the weather but bulls might be heading to the sideline for the time being as U.S. heat fears are subsiding. The December Minneapolis hard red spring wheat contract has now lost $1.10 USD/ bushel since its high on July 5th of $8.43. One could argue that the speculators have left and the best prices moving forward will be seen in protein premiums.

We think there will be some healthy opportunities for your wheat this fall. Why? 76% of the South Dakota spring wheat crop is considered to be in poor-to-very poor (P/VP) shape while just 7% is considered “good” and 1% “excellent”. In North Dakota, P/VP ratings are sitting at 39% while good-to-excellent (G/E) portion is at 32%. Next door in Montana, 55% of the spring wheat crop is now considered in P/VP condition. Conversely, 84% of the Minnesota spring wheat crop is in good-to-excellent (G/E) health. For other small cereals, both 51% of the U.S. oats and barley crops are in good-to-excellent shape. Harvest has started for the latter though, with 24% of the crop now combined, a bit behind last year’s pace.

In Europe, winter grain harvest continues. The E.U. agronomy division is calling for an average E.U. soft wheat yield of 87 bushels per acre. In France, expectations are for a 101.7 bushel per acre crop. Comparably, Agritel recently pegged France's crop at an average yield of 105.9 bushels per acre. This translates to a 36.64 million tonne crop, or a significant 33% improvement in production over last year. These yields are still below the average, but higher acreage is compensating to produce the bigger crop.

Over in Russia, while the crop is looking similar, if not larger than last year's crop. Further, while last year’s crop didn’t have amazing quality, it seems to be much of the same this year. From a price standpoint, 12.5% protein wheat is being offered out of Black Sea ports at $6.70 CAD/bushel.  For 11.5% protein, FOB port prices are sitting around $6.30 CAD / bushel. On the barley front, Russian product is being offered up at about $4.50 CAD/bushel.

In Argentina, wheat planting of the 2017/18 crop has been slowed by rains. To date, about 10.9 million acres of been seeded. With the rains though, it may be tougher to get in the other 2.5 million acres that the Buenos Aires Grain Exchange is forecasting (the planting window ends in August). Acres that are not seeded with wheat as planned will likely go to soybeans in September.

On the cash front, Western Canadian prices fallen back significantly in the past week because of two reasons. The first has already been mentioned: futures values have pulled back. The second is the Canadian Dollar pushing up above 80¢ USD. The higher Loonie makes it more expensive to buy the same amount of grain as a buyer might’ve when the exchange rate was closer to 75 cents. For hard red spring wheat prices alone, the Loonie’s appreciation has accounted for nearly 40 cents / bushel of the drop in the past two weeks. In the last week alone, HRS wheat cash prices across the Canadian Prairies dropped more than 7%. CPS wheat was even worse, down 9%.  Durum wheat has been more resilient, gaining more than 2% or about 20 cents CAD / bushel. Cash canola prices dipped about 3% from last week. Double digits are still available. Yellow peas values across Western Canada dipped last week too though. Most bids for old crop are below $8 CAD / bushel while new crop is trading above that on FarmLead.

Overall, while the board may not reflect it as of late, wheat may just turn out to be one of the most profitable crops of 2017/18. Pro tip though: It won’t be if you’re expecting 2008 prices.

To growth,

Brennan Turner
President & CEO |