Working in a Wheat Sale?
Wheat prices rebounded last week as the complex digested the April WASDE report amid a shortened-week due to Good Friday and some inclement weather in major growing regions. Forecasts calling for drier conditions in Europe and freezing temperatures in the American Southern Plains, namely Kansas, continued to support winter wheat prices.
Last week, we got the USDA’s April installment of its monthly WASDE report. In the wheat complex, U.S. exports were lowered due to uncompetitive prices on the international market. More specifically, HRW and SRW wheat exports were lowered by 10M and 5M bushels respectively (or 272,000 MT and 136,000 MT, respectively, if converting bushels in to metric tonnes). As a quick refresher: international buyers purchase in U.S. Dollars and so when another country’s currency weakens, buyers can buy more product with the same amount of dollars as before the exporting country’s depreciation in their currency.
Elsewhere, the USDA lowered its expectations of wheat exports from Russia by 1.5 MMT, while raised them by the same amount for the European Union. Through last week, we know that EU non-durum wheat exports are tracking 66% higher compared to this point a year ago, with 24.8 MMT sailed. This has been mainly led by France who saw record wheat shipments outside the EU in the month of March. Thus, this increase in EU wheat exports by the USDA seems warranted. However, weaker domestic consumption in India and China pushed aggregate 2019/20 global demand lower by 5MMT. Despite the drop, this is still a world record wheat demand of 750 MMT!
The USDA attaché in Kiev is noting that Ukraine has set a limit of 20.2 MMT of wheat exports until the end of the 2019/20 crop year. For perspective though, the office there has estimated total 2019/20 Ukrainian wheat exports at 19.6 MMT, while the official estimate from the USDA in the April WASDE report was 20.5 MMT, unchanged from the March report. Thus, the takeaway here is that Ukraine limiting exports should be roughly in line with what the market is already expecting.
Switching to another USDA attaché, Morroco’s FAS office says they’re expecting that farmers there will produce just 820,000 MT of durum as yields dropped 40% year-over-year to 14.3 bushels per acre. Intuitively, this means they’ll have to import way more wheat in 2020. Worth noting is that throughout the 2019/20 crop year, Morocco has imported almost all its durum from Canada, with a little bit coming from the EU, America, and Kazakhstan.
Finally bringing it home, we saw wheat prices in Western Canada climb a little bit last week, highlighted by CPS wheat spot price following winter wheat futures higher. Durum prices are currently 23% higher than they were a year ago (read: nearly $2 CAD/bushel better!) and shouldn’t be ignored. Given some of the sporadic demand from the milling side, we’ve continued to see farmer offers for durum and low protein wheat on Combyne, our free cash grain marketplace, get picked off at much better levels than we’ve seen in the past few years. While I’m not advocating for emptying all the bins or forward contracting all your acres, exploring a 10% sale of your production at these levels will likely help the bank account as Plant 2020 draws near.