As unusual weather patterns and ongoing conflict in Ukraine continue to push for alter-spring planting and the wheat market, wheat futures continue to push higher as May approaches.
“We continue to see wheat futures push higher. Minneapolis July futures are up another 35 cents or so compared to two weeks ago, “said Erica Olson, market development and research manager for the North Dakota Wheat Commission. “They traded as high as $ 11.76 today, so we’re back at a premium to about 25 cents in Kansas City.”
Olson pointed out that Kansas City was above Minneapolis while it seemed to switch back and forth depending on who had the worst weather conditions.
The strong price movement is due to two main things: the weather and the continued geopolitical uncertainty, namely the war in Ukraine, although China could be part of that geopolitical uncertainty.
In terms of the weather, the northern plains have been dealing with cold, snow, rain and flooding in recent weeks.
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“So, obviously, that means planting delays. In the last two weeks we went from a potential early and dry planting season to one that’s late and wet, “she said. “We’ve basically had two weeks of snow and rain. Some areas still have 30-40 inches or more of snow on the ground, so (producers) aren’t looking to get in the fields any time soon. Most producers say 2-3 weeks at the earliest.
“The other thing is it looks to continue to be cold, at least in the near-term, so things are just going to melt and dry up very quickly,” she added.
This is especially important, according to Olson, because the 2022 wheat crop will be closely watched over much of the region last year, and low production and tight supplies as a result.
Producers in Canada are experiencing delayed planting and the same weather issues as in Montana and the Dakotas and northern Minnesota.
The big question is how will this delay in planting affect acreage?
“With the delay, we’re looking at a switch to more later-season crops like corn and soybeans, and probably losing some spring wheat acres,” she said. “But at the same time, spring wheat prices are really working their way up and trying to stay competitive, so that helps a little bit.
“As we know, producers prefer to plant wheat early, and that is not going to happen,” she continued. “However, if the weather starts to cooperate, and that is a big if, we know that with today’s technology they can plant a large amount of acreage in a short amount of time.”
Olson noted that when the Prospective Planting Report came out at the end of March producers were already looking at potential low spring wheat acres. The report said spring wheat acres were down about 5 percent in North Dakota.
“A lot of people are just trying to guess how many more we can lose,” she said.
The recently released Canadian acreage report indicated that producers plan to increase spring wheat acreage by about 7 percent to 17.6 million acres. Of course, similar to the USDA report, a lot has changed since their surveys were done.
“With the planting delays, I think that number is in question,” she said.
In other market related news, in the US hard red winter wheat region of the country, the crop has been stressed due to drought, and some freeze damage that occurred earlier in the year. As a result, the crop ratings in the region continue to drop. Only 27 percent of the crop was rated in good-to-excellent condition in the latest crop condition report from the USDA, which is the lowest rating in about 10 years.
“However, we always seem to have issues with the winter wheat crop and it seems to come out okay,” she said. “But we’ve been hearing more talk about declining conditions and also some talk about some of the crop being abandoned, especially further west, so we’ll see what happens.”
The other major issue is keeping a close watch on the market in Ukraine and just how it will affect or not affect exports. Olson noted that for a while Russia’s exports had slowed down quite a bit, but have recently picked up again.
“They will continue to export despite the sanctions and some logistical issues,” she said, adding that Russia recently announced that customs will no longer be publishing import and export data. “So we won’t get those official numbers, but it does appear that their exports have been picked back up.”
Exports out of Ukraine are still fairly minimal due to the fact that the country does not really have port access at this time. A big, looming question is how much of the 2022 crop will it even get harvested and be available for export.
Looking at some other potential production scenarios around the world, Olson points out that in its first estimate for 2022 production, the International Grains Council (IGC) is forecasting that world production could fall for the first time in four years.
“One reduction was for Ukraine based on the potential there would be no crop to harvest,” she said.
Production in Morocco is also expected to decline due to severe drought, and China, too, is anticipating lower production as growing conditions are ideal. Production in Europe is also forecast to be lower due to dry conditions.
On the other hand, the IGC is forecasting higher wheat production in North America. However, because of some recent weather issues in the US and Canada, that is unknown at this time.
The IGC is also forecasting higher production in Russia due to better moisture conditions at this time.
Looking at export demand, Olson said the US did make some spring wheat sales in the week ending April 22. The new sales totaled about 3 million bushels (MB) with most going to Mexico and Italy. Total sales to date are just under 200 MB.
“It’s been consistent throughout the marketing year, but we’re still about 30 percent lower than last year,” Olson said. “That’s pretty much what we expect throughout this year with our smaller supplies. USDA’s estimate was for sale in 205 million bushels and we have about five weeks left of the marketing year, so we should get there. “
Compared to Canada, sales are down a bit steeper at 43 percent from last year.
“The big thing is these next few weeks are the weather and when producers are finally able to get in the fields,” she said. “I think the market will be seeing this fairly closely as everyone was expecting a rebound in production in both the US and Canadian spring wheat regions and this late planting will definitely affect that.”
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