Wheat prices try to fin­ish 2018 on the up­swing

Prairie Post (East Edition) - - Farm News - BY BREN­NAN TURNER

Last Tues­day, we got the USDA’s De­cem­ber WASDE re­port. As re­minder, in the Novem­ber WASDE re­port, the USDA ad­justed pro­duc­tion and car­ry­out num­bers for China, which boosted corn and global wheat stocks sig­nif­i­cantly.

Glob­ally, if we didn’t count a sig­nif­i­cant in­crease in Chi­nese wheat num­bers from the Novem­ber WASDE re­port, the to­tal 2018/19 global har­vest would’ve been low­ered by 1.9 MMT in that re­port. But again, with China, global wheat ending stocks were raised up to nearly 267 MMT.

In the De­cem­ber WASDE, global wheat ending stocks for the 2018/19 crop year were raised by nearly 1.5 MMT from the last WASDE re­port, but this was mainly at­trib­uted to U.S. and EU wheat ending stocks climb­ing as a re­sult of less ex­ports from these play­ers.

On the bear­ish side, Rus­sian wheat ex­ports were raised by 1.5 MMT but Aus­tralian wheat ex­ports ba­si­cally off­set that, as they were low­ered by 1 MMT from last month, thanks to their smaller crop. With big­ger Rus­sian wheat ex­ports, this will put some pres­sure on U.S. wheat prices for sim­i­lar pro­tein lev­els.

Ex­porters and Rus­sian ag min­istry of­fi­cials met this week to align on what do with wheat ex­ports go­ing for­ward. There have been ru­mours swirling for a few weeks now that the Rus­sian gov­ern­ment might step in to pre­vent food price in­fla­tion and put a cap on wheat ex­ports.

On that note, cur­rently, Rus­sian wheat ex­ports are fly­ing out of the ports. As of De­cem­ber 1st, Rus­sian on farm wheat stocks are down 29% year-over-year. With Rus­sian live­stock feed de­mand main­tain­ing a pace sim­i­lar to last year, it’s ex­pected that the amount of ex­portable wheat sup­plies are quickly dwin­dling. This likely trans­lates to a win­dow of op­por­tu­nity open­ing up in 1Q2019 for other ma­jor wheat ex­porters.

And it seems like we’re start­ing to see some of that com­pe­ti­tion to­day. China has be­come the 4th largest buyer of U.S. spring wheat (mainly for blend­ing pur­poses though). On that note, through Week 27 of the 2018/19 U.S. wheat crop year, Amer­i­can hard red spring wheat ex­ports are track­ing 4% above last year’s pace with 3.27 MMT (or 121.2 mil­lion bushels) shipped out.

A sim­i­lar dy­namic has been seen in Cana­dian non­durum wheat ex­ports, as China has been a very large buyer, help­ing sup­port do­mes­tic cash wheat prices. With this in mind, ship­ments through Week 19 of the Cana­dian crop year are track­ing nearly 19% higher; Mar­ket­ing-year-to-date, 6.9 MMT of non-du­rum wheat has been ex­ported from Cana­dian ports.

Switch­ing gears, du­rum prices have been noth­ing to write home about, but there have been some in­cre­men­tal gains worth rec­og­niz­ing. This is es­pe­cially no­table in Italy where val­ues are up nearly 6.5% in the past month.

One thing to con­sider this year for du­rum wheat prices is that Aus­tralia won’t be much of a player, given their drought this past grow­ing sea­son. This means not a lot of Aussie du­rum ex­ports as most pro­duc­tion will go into do­mes­tic mills and even feed ra­tions as the de­mand is so high. That be­ing said, we’re not nec­es­sar­ily see­ing those val­ues trans­late to bet­ter prices in West­ern Canada just yet. As a re­minder, the high for du­rum prices in the 2017/18 crop year was ac­tu­ally in Jan­uary!

Fi­nally, gain fell last week in north­ern Ar­gentina, just as the wheat har­vest was start­ing to pick up steam. More rain is ex­pected early this week so this, com­bined with re­cent frosts, we might see more pro­duc­tion down­grades from the coun­try. It’s ob­vi­ous to also ex­pect to see qual­ity is­sues as well. De­spite the rain, it’s es­ti­mated that the Ar­gen­tine wheat har­vest is nearly 2/3 com­plete.

On that note, the Buenos Aires Grain Ex­change low­ered their es­ti­mate of Ar­gentina's 2018/19 wheat har­vest by 200,000 MT to 19 MMT, mainly be­cause of the rain and frost. Com­bined with the smaller Aus­tralian wheat crop, the South­ern Hemi­sphere har­vest is seem­ingly pro­vid­ing a good win­dow of op­por­tu­nity for wheat prices as we flip the cal­en­dar into 2019.

To growth,

Bren­nan Turner is Pres­i­dent & CEO of Far­mLead.com

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