US Wheat Associates

June 12, 2020

USDA’s June estimate for record 2020/21 global wheat ending stocks (see below) pressured all wheat futures prices week-over-week. CBOT soft red winter (SRW) futures fell 13 cents on the week to close at $5.02/bu. KCBT hard red winter (HRW) futures lost 13 cents to end at $4.48/bu. MGE hard red spring (HRS) futures fell 5 cents to close at $5.13/bu. CBOT corn futures fell 2 cents from last week to end at $3.30/bu. CBOT soybean futures gained 3 cents to close at $8.71/bu.

Minimal export capacity out of the Center Gulf supported Gulf HRS export basis for June and July deliveries. Uncertainty about new harvest protein levels widened Gulf HRW export basis discounts and premiums week-over-week. The potential for nearby farmer selling pressured Pacific Northwest (PNW) HRS export basis for June and July deliveries. Increased export demand supported PNW soft white wheat (SW) export prices for nearby and deferred deliveries.

Despite worsening dryness across the Southern Plains (see below), total U.S. winter wheat crop ratings held steady week-over-week at 51% good to excellent. Total crop ratings in Kansas remained the same at 42% good to excellent. Colorado crop ratings increased slightly from last week to 32% good to excellent. In Oklahoma, winter wheat rated as good to excellent fell 10 points from last week to 46%.

The new crop U.S. HRW wheat harvest is in full swing from Texas to southern Kansas and the SRW harvest is well underway from Alabama to Virginia. According to USDA, as of June 8, 7% of the country’s total winter wheat area is harvested. Click here to read more about the 2020 U.S. wheat harvest.

Dry weather across the Northern Plains helped boost U.S. spring wheat planting week-over-week. Farmers have now planted 97% of intended spring wheat area, up from last week’s 91% but slightly behind the 5-year average of 99%. According to USDA, 82% of the country’s spring wheat is in good to excellent condition, up from last year’s 81%.

According to USDA, as of June 4, total U.S. wheat export sales for delivery in 2019/20 ended at 26.9 million metric tons (MMT), 4% ahead of 2018/19. Total HRW sales reached 10.2 MMT, 8% ahead of 2018/19. HRS sales totaled 7.97 MMT, 11% ahead of 2018/19. SRW sales fell 26% year-over-year to 2.45 MMT. Total white wheat sales (hard and soft) fell 2% on the year to end at 5.34 MMT. Durum sales nearly tripled year-over-year to end at 966,000 metric tons (MT). To read more about year-end commercial sales, click here.

This week’s commercial sales of 270,000 MT for delivery in 2020/21, through June 4, were down 38% from last week’s 437,000 MT but within trade expectations of 200,000 MT to 500,000 MT. Year-to-date commercial sales for delivery in 2020/21 total 5.83 MMT, down 5% from last year. USDA expects all 2020/21 U.S. wheat exports will total 25.9 MMT, down 2% from 2019/20, if realized.

Hot, dry weather increased drought stress across the western Great Plains. Abnormal dryness spread in western South Dakota, western Nebraska, central Kansas and western Oklahoma. Pockets of severe to extreme drought appeared in western Oklahoma and the Texas Panhandle. Looking ahead, hot, dry weather is expected to persist across the Southern Plains. Warm temperatures and beneficial precipitation are forecast across the Northern Plains.

In its June World Agricultural Supply and Demand Estimates (WASDE) report, USDA increased its 2020/21 wheat production estimates for the United States, Australia and China. U.S. wheat production is now expected to total 51.0 MMT, which would still be 3% less than 2019/20. Australian wheat production is forecast to jump 71% from last year to 26.0 MMT as beneficial precipitation pulls the country out of a three-year drought. USDA now expects 2020/21 Chinese wheat production to reach 136 MMT, up slightly on the year.

USDA forecasts total global wheat ending stocks will reach a record 316 MMT in 2020/21, 2% more than the May forecast, 7% more than last year and 16% more than the 5-year average. Chinese ending stocks are expected to reach a record 162 MMT in 2020/21, 7% more than last year and 28% more than the 5-year average. If realized, Chinese endings stocks would make up 51% of the global total.

Persistent dryness during the growing season in the European Union (EU) and Ukraine prompted USDA to reduce its 2020/21 wheat production forecasts in both regions. The EU is now expected to produce 141 MMT of wheat this year, down 9% from 2019/20. USDA now expects Ukrainian wheat production will fall to 26.5 MMT in 2020, 9% below last year’s record of 29.0 MMT.

Argentinian wheat planting for the 2020/21 season jumped week-over-week to 42% complete, 10 points ahead of the 5-year average, as farmers took advantage of dry weather ahead of weekend rains, the Buenos Aires Grain Exchange said in its weekly crop report. USDA estimates Argentinian wheat production will reach 21.0 MMT in 2020/21, up 8% from last year, if realized.

The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials like grains, coal and iron ore, jumped 24% on the week to end at 839.