Wheat mar­kets heat up ahead of StatsCan

Prairie Post (East Edition) - - Farm News - POSTED BY BREN­NAN TURNER, Pres­i­dent & CEO, Far­mLead.com

To end the month of Novem­ber, fu­tures val­ues in­creased in Min­neapo­lis, help­ing both CPS and CWRS wheat prices make some sig­nif­i­cant gains. They were also helped by ba­sis im­prov­ing by about a nickel for most de­liv­ery pe­ri­ods and are now any­where from 10 - 20 cents a bushel bet­ter than this time a month ago.

Un­less some­thing dras­tic changes the cur­rent val­ues in all pulses and du­rum mar­kets, then we know we’re go­ing to see more spring wheat planted in North Amer­ica next year. We think that this could put some down­side pres­sure on De­cem­ber 2019 spring wheat prices, but it will likely be sim­i­larly felt in ba­sis.

Spe­cific to CPS wheat, prices are close to their sum­mer-highs and also not far from their all-time highs seen last June, we think there is more down­side risk in the mar­ket. This is es­pe­cially true given the wheat har­vest in Ar­gentina is start­ing to come off and com­pete in the in­ter­na­tional mar­kets. Specif­i­cally, one-third of Ar­gentina’s wheat crop has now been har­vested, a good dis­tance ahead of last year’s pace. The Buenos Aires Grain Ex­change is es­ti­mat­ing this year’s Ar­gen­tine wheat har­vest at 19.2 MMT. What’s in­cred­i­ble is that 7.9 MMT of the crop has been for­ward sold (a new record) and all but 600,000 MT of this is al­ready con­tracted for ex­port.

It’s ex­pected that Ar­gentina’s wheat crop will com­pete with CPS wheat from Canada and SRW or HRW wheat from the U.S. in the likes of Africa and other parts of Latin Amer­ica. What’s in­ter­est­ing though is that Asian millers are buy­ing from Ar­gentina right now, more than a few months be­fore they usu­ally do.

Put sim­ply, Ar­gentina’s wheat is com­pet­i­tive this year. For ex­am­ple, 11.5% protein wheat from the South Amer­i­can coun­try is be­ing con­tracted by In­done­sia at a de­liv­ered price of $259 USD / MT (or $7.05 USD and $9.35 CAD per bushel). This would be cheaper than most other sim­i­lar qual­ity wheat com­ing from U.S., Cana­dian, Aus­tralian, or Black Sea ori­gin.

U.S. du­rum wheat, how­ever, seems to be com­pet­i­tive. Crop year to date, the US has ex­ported 243,665 MT of du­rum though, up 21.4% year-over-year. That be­ing said, U.S. du­rum ex­port sales (con­tracted but not shipped) are ac­tu­ally track­ing 54% higher year-overyear at about 400,000 MT! Thanks to a bit of a poor crop in France, the EU is the largest buyer for U.S. du­rum, fol­lowed by Al­ge­ria and Nige­ria.

For com­par­i­son, through Week 17 of the 2018/19 crop year (end­ing Novem­ber 25), Cana­dian du­rum ex­ports are sit­ting at a to­tal of 1.01 MMT, down 22.5% year-over-year. Not help­ing ei­ther is the do­mes­tic dis­ap­pear­ance of Cana­dian du­rum, which is sit­ting at just 118,900 MT, more than half of what it was at this time a year ago.

While it’s pos­si­ble that we see some bullish num­bers in the De­cem­ber 6th StatsCan pro­duc­tion re­port, it’s not re­ally ex­pected by the du­rum mar­ket to­day. Given the myr­iad of de­pressed de­mand fac­tors, most eyes are al­ready on next year’s op­por­tu­ni­ties. Con­versely, spring wheat con­tin­ues to see some solid op­por­tu­ni­ties and it doesn’t look like they’re slow­ing down. Some­thing to keep in mind, how­ever, is that the mar­ket has a way of keep­ing us in check just when we’re get­ting com­fort­able.

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