As of May 9, the spring wheat market, both futures and cash levels, continued to push for highs as a number of issues were factored into the move, including weather, planting progress, and the ongoing war between Russia and Russia. Ukraine, among others.
Cash prices for spring wheat across the region were from $ 11.30- $ 11.50 per bushel. New crop prices were slightly lower at $ 11.20- $ 11.40 per bushel, according to Jim Peterson, marketing director with the North Dakota Wheat Commission.
“We’ve rallied about 75 cents a bushel since the spring wheat futures complex in early May,” he said. “This last rally has been driven by overly wet conditions in the central and eastern part of the producing region and cool soil temps, so planting progress is extremely slow in North Dakota and Minnesota. Collectively, they account for almost two-thirds of US spring wheat production, so they’re two pretty critical states. “
As of May 8, the latest crop progress report showed that only 2 percent of the crop was planted in Minnesota, well behind the five-year average of 50 percent and the 90 percent figure a year ago. In North Dakota, 8 percent was planted. The five-year average is 37 percent and last year almost two-thirds of the planting was complete.
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As a result, there are some pretty notable concerns about potential acreage losses across parts of the region.
“We’ll have to see what field conditions are like around May 20-25, because that will probably be a pretty critical time when we can see if more acres switch to soybeans, and if it gets much later than that, then producers will. have to consider to prevent the plant, “he said.
In the US as a whole, because of much better progress in South Dakota and Montana, 27 percent of the US spring wheat crop was planted. The average is 47 percent. In South Dakota, about two-thirds of the plants were completed and in Montana about 50 percent was planted.
“Obviously, they ‘re making better progress. With the better pace in Montana we could probably pick up some extra spring wheat acres there, “he said. “That’s kind of what has been propping up the market now, but it doesn’t say the market is subject to a sell-off if better progress is being made.
“As mid-May rolls around, we’re starting to see a little more weakness in corn and soybeans on a better planting window in some of those key states where it was cold and wet early. If that continues, that could lead to more technical sell-offs, “he continued.
“Also, with the hard red winter wheat crop in the US, even though it has been extremely dry over large areas of the area and the forecast does not look promising going forward, there are more showers hitting the region, making their way further west. , ”He added.
One benefit of the winter wheat crop is that it has a bit later in maturity, so as they get some later rains, that could benefit. However, for western Kansas, Oklahoma, and Texas, it may be too late for additional rain. That ‘s what the market is trying to judge, according to Peterson.
According to the latest crop condition ratings for the US winter wheat crop, 29 percent is rated in good-to-excellent condition, which is up slightly from early April. A year ago, 49 percent was rated good-to-excellent. Even though the rating made a slight improvement, it was obviously still well below a year ago, and one of the lowest ratings in a number of years.
In Texas, about 80 percent is rated poor-to-very poor, meaning there will be a lot of acres that won’t make it to harvest. In Colorado, 58 percent of the crop is rated poor-to-very poor and in Oklahoma 47 percent is poor-to-very poor. The crops in Montana and Kansas are both rated in the upper 30 percent range of poor-to-very poor. All are pretty key states that are looking at some pretty tough crop conditions and that helped support the market to this point. However, will it be enough if there is some pressure on corn and beans, or from global macro issues?
Looking at other factors in the market, the weather takes a front row seat this time of year because farmers are putting in the spring wheat crop and the winter wheat crop is a prime development stage. This is a key time, so that ‘s going to catch the headlines.
Looking at the world scenario, Peterson noted there’s still a lot of attention on world wheat supplies.
“How much of a gap will there be with the Russian attack on Ukraine, and when will buyers be looking for other sources? That ‘s still unknown and there are lots of different opinions, “he said. “So that’s a very supportive factor for wheat because the anticipation is that there will be a shortage coming out of the Black Sea region, but just how much and what time frame the question is.”
The wheat market did get some support from some extremely hot temperatures in India during a critical stage for the crop. Speculation was that early in April the crop was estimated at 111 million metric tons (MMT), but with the heat the forecast was dropped to 105 MMT, and some estimates are down to 100 MMT.
“That would obviously curtail their ability to export. India has been filling some gaps lately, but that may change quickly if the government puts on some export quotas, “he said.
“Even though all this has been fairly bullish for prices and price outlook, there is little concern that we may face some near-term pressure from the region with more entities, the United Nations and others, trying to get some of the Significant levels of Ukrainian grain at the ports are currently through the blockades by Russia and exported. We’ll see if that ever comes to fruition, “he continued.
“The other issue is that Russia has been surprisingly, or maybe for a lot of people unsurprisingly, taking a huge advantage of the uptick in world prices. They have a tax on their exports and have not throttled back on their wheat exports, so they are making pretty good money in traders and government coffers selling their wheat, “he added.
Also, Romania and Bulgaria have been helping Ukraine export some of its wheat over the land rather than going through the ports, which are under siege right now. If more of that continues, Peterson said world supplies may not get as tight as many expect. Plus, Russia is also a big crop in the making, maybe 10-12 percent larger than last year. The expectations are that Russia will aggressively export its wheat from July-September position forward.
Overall, Peterson noted that things are still considered bullish, but a bearish sentiment can’t be ruled out with all the uncertainty. Some of the key population centers in the world have been switching from rice to wheat diets over the last few years.
“However, some of those sectors are shifting back to rice just because on a per calorie basis that it has gotten cheaper and doesn’t quite concern as much with the Ukrainian situation,” he said.
Other than some of those world issues, Peterson expects the market will remain volatile just because parts of Europe are dry.
“The Indian crop situation went from plentiful to worries about a shortage in short order. And we have our own US situation, “he said.
On May 12, USDA will release its updated supply and demand report, which will be the first look at 2022 crop projections, producing both as well as demand for both the US and the world.
“That’s going to be a key market-mover because that will be their first forecast for Ukrainian exports, Russian exports for next year, and US production and demand, so there will be a lot of key numbers,” he said.
In the US, producers are still trying to get the crop planted. In comparable wet years – 2011 and 2013 – producers lost more than 1 million to 1.5 million acres of intended spring wheat plantings from the March survey until June. If that were to happen this year, that would be a significant hit to potential supplies.
Canada is facing a similar overly wet situation in Manitoba and parts of eastern Saskatchewan, but on the flip side it is still quite dry in western Saskatchewan and Alberta. Their crop is still as good and only 4 percent is planted, Peterson noted.
“At the end of the day we’re in a period where production gets a lot of discussion. But we need to look at demand and right now US exports to continue to struggle, “he said. “Also, Russia is undercutting world values, moving their wheat even with higher risk to buyers.”
As of the end of April, US all wheat exports were 713 million bushels (MB), which is off 24 percent from a year ago. By class, hard red spring wheat sales are at 201 MB, off 25 percent, but at 98 percent of USDA’s goal for the year. Hard red winter wheat sales are at 276 MB, off 14 percent, and only at 89 percent of the goal.
That’s something to watch in the May report as there was an expectation that the US might capture some demand in the near-term with the concerns over the Ukraine / Russia situation. So far they have not come to fruition either in the US or Canada. Canadian sales are off 442 percent.
“A lot will be determined over the next month – how much of the spring wheat crop gets planted and does the US winter wheat crop turn around. Is there a push to move more Ukrainian stocks into the ports on the world market? All of those factors are going to be market-movers, “he said.
“It’s definitely a challenging time for producers to try to get the crop planted and also making marketing decisions. Producers in the east are expecting warmer and much drier weather while producers in the west are thankful for the moisture they’ve gotten, but may also be hoping for a break from the rains for a bit, “he added.
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