September 13, 2019
Wheat futures were up across the board week-over-week buoyed by positive steps to end the trade dispute between the U.S. and China. Export sales data saw shipments exceeding expectations but high global supplies and a bumper harvest in the EU kept prices firm. Persistent rains in Montana, North Dakota and western Minnesota, where 1/3 of the crop is still in the field, supported HRS prices. Carry over from last year likely kept prices from pushing higher. Soft red winter (SRW) December futures were up 20 cent to close at $4.83/bu and hard red winter (HRW) futures rose 6 cents to end at $3.99/bu. Hard red spring (HRS) December futures were up 11 cents to close at $5.05/bu. CBOT December corn gained 11 cents to end at $3.69/bu. CBOT January soybean futures were up 36 cents to close at $9.11/bu.
The USDA’s monthly supply and demand report was published on Thursday with little change for wheat, except putting global ending stocks up slightly higher than many analysts expected. Strong export competition and abundant supplies offset news about dry conditions in the southern hemisphere to keep basis fairly flat. An unexpected lock closure on the Columbia River supported nearby soft white wheat export prices out of the Pacific Northwest.
The USDA reported as of September 8, 71% of the spring wheat harvest complete, well behind last year’s average of 92% and behind the 5-year average of 87% but ahead of market expectations of 69%. Persistent rain in the region kept combines out of the fields this week.
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Commercial Sales
Net U.S. wheat sales as of September 5 of 611,000 metric tons (MT) for delivery in 2019/20 were 96% higher than last week’s 312,000 MT and above trade expectations of 300,000 to 600,000 MT.
Year-to-date total commercial sales of 12.0 million metric tons (MMT) are 23% ahead of last year’s pace. USDA currently forecasts 2019/20 U.S. wheat exports will total 26.5 MMT, 4% more than 2018/19, if realized.
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The U.S. Drought Monitor for the week ending September 10 saw dry and warm weather across Texas and southern Oklahoma degrade topsoil moisture ratings to poor or very poor. Some light showers were welcome in northern Texas and the Oklahoma Panhandle. Monsoonal moisture was scattered across the Plains from Kansas to Wyoming. Most of the High Plains region has adequate or surplus moisture. Rain across Montana, North Dakota and western Minnesota delayed spring wheat harvest. Little rain was seen in the eastern part of the Midwest and southwest Ohio was upgraded to D1 (abnormally dry) with 3 to 6 inches of deficit rainfall. Rains fell across the Pacific Northwest, Idaho and western Wyoming. Western Oregon and Washington received 2 to 4 inches of rain. However, more moisture is needed to ease the drought conditions in those states.
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France is expected to harvest its second-largest soft wheat crop on record. Production is expected to total 39.45 MMT, 16 percent above last year. FranceAgriMer forecasts that French soft wheat exports outside of the European Union will be at their highest level in four years, up 14 percent compared to last season at 11.0 MMT.
Black Sea wheat exports from Russian ports is 31.5 percent behind where it was at the same time a year ago. Despite that, Black Sea wheat overall is seeing significant export opportunities. Officials from Russia and Kazakhstan are expecting export opportunity to China to open up soon. Despite a 1.5 MMT reduction in Kazakhstan’s wheat harvest, its president says they expect to triple their wheat exports to neighboring China. Saudi Arabia opened its wheat tenders to offers from the Black Sea this week. Some traders estimated that wheat from the Black Sea would make up as much as 60 percent of the tender.
Trade talks are set to resume between the U.S. and China in early October. Both sides have made goodwill gestures ahead of talks: President Trump delayed increased tariffs on Chinese goods by two weeks and China exempted some U.S. goods from tariffs. President Trump tweeted that “It is expected that China will be buying large amounts of our agricultural products” and Chinese companies were reported to be inquiring about prices for some U.S. agriculture goods. Private companies in China were reported to purchase 600,000 MT of U.S. soybeans on Thursday, the biggest purchase since June.
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Baltic and U.S. Dollar Indices
The Baltic Dry Index dropped 168 points over last week to end at 2,331.
The U.S. dollar Index hardly changed at 98.42 versus last week’s 98.36.
Source: U.S. Wheat Associates