After experiencing a slide in prices over the past few months, spring wheat prices have seen a slight rebound in early April following the release of USDA’s Prospective Planting Report.
“Prices are back up a little bit after dipping to the lowest levels that we’ve seen in quite a while last week,” said Erica Olson, market development and research manager for the North Dakota Wheat Commission, noting that May Minneapolis futures were trading around $6.50 as of April 9, and that put cash prices around the region anywhere from $5.90 to $6.30.
“The main thing is we’re still just lacking any supportive news for the wheat markets,” she said.
In the March Prospective Planting Report, there was really no big shock for wheat as projections came in as expected by many in the trade.
“The bigger changes were for soybeans where acres came in higher than expected, and corn acres came in lower than expected, so it was somewhat bullish for corn,” she said.
Wheat, on the other hand, was pretty much within expectations. Total U.S. wheat acres were down 4 percent, with most of that decline coming from the winter wheat classes, which was already known. Total U.S. spring wheat acres were estimated at 11.3 million acres, which is up 1 percent from last year.
Breaking it down by state, what was surprising, according to Olson, was where the increase was coming from. In Minnesota, spring wheat acres are projected to be up by 300,000 acres, a 23 percent increase, while South Dakota acres are also projected to increase by 15 percent. In North Dakota, spring wheat acreage is expected to see a 250,000-acre decline, which would be a decrease of 5 percent. And in Montana, spring wheat acreage is right in line with last year.
North Dakota saw projected increases for soybeans, dry beans, peas, lentils and durum. Acreage declines came out of barley, sunflower, spring wheat and canola, Olson pointed out.
“This is just an initial estimate. Obviously, both producers and the market tend to react to this report,” she said. “I do think, at the end of the day, we may see our spring wheat acreage number come up a little from this first estimate, but, at these prices, I’m not expecting any sort of huge increase.”
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On the day USDA released the Prospective Planting Report, it also released its March 1 stocks report. U.S. wheat stocks are projected at a three-year high of 1.1 billion bushels. That’s up 16 percent compared to a year ago.
“As we’ve seen in the WASDE reports (World Agricultural Supply and Demand Estimates), USDA is forecasting an increased stocks number at the end of the year compared to the previous year. That’s positive for our supply situation and also customers, but obviously it’s not price friendly. If we look long term, we’re looking at the second lowest stock level in about nine years,” she said.
Another big topic for the market is the condition ratings of the U.S. hard red winter wheat crop, which “are better than we’ve seen in quite a few years.” Current ratings had 56 percent of the crop rated in good-to-excellent condition. That compares to just 27 percent last year at this time.
“The crop is definitely looking better and has a lot of potential, but we’re hearing from some of the southern states that they have seen the ratings drop a little in recent weeks, especially in areas that have missed the rainfall, and there are still dry areas. Obviously, this is a critical time for crop development,” she said.
Other than that, a lot of the news is the same for the wheat market. U.S. wheat export sales have been a struggle the last couple of weeks. In fact, in the sales report for the first week in April, there was a sizeable reduction in sales, according to Olson.
“(We had) some negative sales that really pulled our number down. We did see a sizeable sale of soft red winter wheat to China of 2.7 million bushels. Of course, with some of those recent cancellations, hopefully that goes through,” she said.
On the spring wheat side, things have been very quiet as well, although there were some small sales the past couple weeks. Still, spring wheat export sales are 16 percent higher than a year ago.
Olson also noted there are a few concerns around the world, one being the weather. For example, in some areas like France, it’s been wet, while in North Africa, warm and dry conditions are reported, and there are still dry in areas of the North American spring wheat region.
“So, there are some concerns out there,” she said. “The other concern lately has been Russia. Not only are they dry in some areas, but the most recent issue is some of their ships have been held up, supposedly due to phytosanitary concerns from the importers, but some think it’s more of a ploy for the Russian government to have more control over exports.
“Regardless of the reason, the fact is ships are being held up and that’s obviously concerning to the world market. So, we’ll see how that plays out,” she concluded.
