Wheat markets heat up ahead of StatsCan

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.