Both winter wheat futures contracts, hard red winter (HRW) and soft red winter (SRW), settled higher week-over-week due to technical buying and news that Egypt’s grain buyer GASC bought 405,000 metric tons (MT) of French, Russian, and Ukrainian wheat at higher prices on Oct. 16 than it paid at its previous tender on Oct. 8 (see below). The hard red spring (HRS) futures contract ended lower on news of slightly more favorable harvest conditions in Canada. HRW December futures gained 24 cents to close at $5.32/bu. SRW December futures gained 14 cents to end at $4.33/bu. HRS December futures lost 3 cents to close at $5.44/bu. CBOT December corn futures lost 7 cents to end at $3.91/bu. CBOT January soybean futures lost 3 cents to close at $9.47/bu.
- Increased farmer selling due to two weeks of higher futures prices weakened HRS and HRW export basis out of the Gulf and Pacific Northwest (PNW) for November and December deliveries. HRS export basis out of both export regions is still significantly higher than average; read more about elevated HRS export prices here. News of increased heat and dryness across Australia (see below) supported U.S. white wheat prices week-over-week. The 10% white wheat premium increased another 5 cents/bu this week on minimal farmer selling.
- Heavy, persistent precipitation, including significant snowfall in parts of North Dakota and Montana, has all but ended the 2019 HRS and northern durum harvest. On Oct. 15, USDA reported spring wheat harvest at 94% complete, compared to 91% last week and the 5-year average of 100%. Northern durum harvest stood at about 80% complete. U.S. winter wheat is 65% planted compared to 64% last year and the 5-year average of 65%.
Commercial Sales
- Net U.S. wheat sales of 395,000 metric tons (MT) as of Oct. 10 were 24% less than last week’s 522,000 MT and in line with trade expectations of 250,000 to 550,000 MT. Year-to-date commercial sales of 13.8 million metric tons (MMT) are 14% ahead of last year’s pace. USDA currently forecasts 2019/20 U.S. wheat exports will total 25.9 MMT, 1% more than 2018/19, if realized.
- Click here to view the most recent USW Commercial Sales report.
Parts of Texas, Oklahoma, and the mid-South saw rain this week that helped ease drought and abnormal dryness in some areas. However, dryness continues expanding north from Texas. There was no change in drought status in Colorado or Wyoming, but abnormal dryness and moderate drought expanded in Kansas with pockets of severe drought developing in southwest Kansas. Nebraska and the Dakotas continued free of drought and abnormal dryness. Wheat production regions of Montana and the Pacific Northwest remain relatively drought-free. Southern and Midwestern soft red winter production regions remain very dry.
- According to Reuters, Australian wheat production could fall below the 2019/20 USDA estimate of 18.0 MMT as hot, dry conditions are less localized and more evenly distributed across the country’s landmass than last year. So far in 2019, the regions in western Australia have received a third less rainfall than normal and regions in eastern and southern Australia have received as little as 75 percent less rainfall than normal.
- The Buenos Aires Grains Exchange reported this week that drought conditions in Argentina could cause potential wheat yield losses. Last week, the exchange cut its MY 2019/20 wheat forecast to 19.8 (MMT) from a previous estimate of 21.0 MMT. Argentina is expected to use 6.0 MMT of wheat in the current marketing year, meaning any decrease in production will likely come from forecasted exports, which USDA currently estimates at 14.5 MMT.
- Stratégie Grains has again lifted its outlook for European Union soft (non-durum) wheat exports this season, citing competitiveness on world markets and lower global supply, notably from drought in Argentina and Australia. The consultancy forecast 2019/20 exports outside the EU at 27.3 MMT, up from its September estimate of 25.7 MMT. It also suggested Russia may not be able to meet increased export demand that is more likely to be filled with EU and U.S. wheat supplies. In addition, sowing of winter cereals for next year’s harvest also accelerated last week, FranceAgriMer’s weekly crop report showed. Farmers had sown 21% of the expected soft wheat area by Oct. 14, up from 4% a week earlier.
- Black Sea and EU wheat export prices continue to increase with tightening global supply and sustained demand. Reuters reported that prices offered in reply to Egypt’s latest international tender were about $6.00 to $9.00 per MT more than offers for its Oct. 8 tender
Baltic & U.S. Dollar Indices
- The Baltic Dry Index fell 3% this week to close at 1,861
- The U.S. Dollar Index fell from 98.30 last week to end at 97.29 this week.
Source: U.S. Wheat Associates