US Wheat Associates

USDA reduced its 2020/21 estimates for total global wheat production and total global wheat ending stocks (see below) which supported all wheat futures prices week-over-week. CBOT September soft red winter (SRW) futures jumped 42 cents on the week to end at $5.34/bu. KCBT September hard red winter (HRW) futures gained 18 cents to close at $4.52/bu. MGE September hard red spring (HRS) futures added 16 cents to end at $5.26/bu. CBOT September corn futures lost 6 cents to close at $3.37/bu. CBOT September soybean futures fell 4 cents to end at $8.85/bu.

All U.S. Wheat Associates (USW) basis and FOB prices for all classes of wheat for July delivery are now over the September 2020 (U20) wheat futures contracts.

A July 10 USDA report that China bought 190,000 metric tons (MT) of HRW and 190,000 MT of HRS supported Pacific Northwest (PNW) HRW and HRS export basis for July and August deliveries. PNW HRW protein spreads narrowed on the week. Higher CBOT SRW futures prices supported PNW soft white wheat export prices week-over-week. Limited export elevation capacity out of the Center Gulf supported Gulf HRS export basis for nearby and deferred deliveries. Tight exportable supplies and limited elevation capacity supported Gulf SRW export basis week-over-week.

In its July World Agricultural Supply and Demand Estimates (WASDE) report, USDA reduced its estimate for U.S. 2020/21 wheat production to 49.6 million metric tons (MMT), down 5% from last year, if realized. U.S. wheat exports for 2020/21 are now forecast at 25.9 MMT, stable with June’s estimate but 2% less than 2019/20.

USDA’s July WASDE report offered the first by-class production estimates for marketing year 2020/21. HRW production is forecast to fall 15% on the year to 19.2 MMT. HRS production is estimated to fall 4% from last year to 13.7 MMT. SRW production is forecast to increase 18% on the year to 6.50 MMT. Total white wheat production (soft and hard) is estimated to remain relatively stable year-over-year at 7.48 MMT. Durum production is also forecast to remain relatively stable with last year at 1.52 MMT.

Increased dryness across the western Great Plains pressured total U.S. winter wheat ratings to 51% good to excellent this week. Total crop ratings in Kansas remained the same week-over-week at 46% good to excellent. Montana winter wheat ratings fell slightly from last week to 86% good to excellent. In Nebraska, winter wheat rated as good to excellent decreased 6 points from last week to 50% this week.

The new crop U.S. HRW harvest reached southern Nebraska this week and SRW harvest is well underway from Arkansas to Ohio and on to Virginia. According to USDA, as of July 6, 56% of the country’s total winter wheat area is harvested. Click here to read more about the 2020 U.S. wheat harvest.

Commercial Sales

This week’s commercial sales of 326,000 MT for delivery in 2020/21, through July 2, were down 21% from last week’s 414,000 MT but in line with trade expectations of 200,000 MT to 550,000 MT. Year-to-date commercial sales for delivery in 2020/21 total 7.56 MMT, 1% ahead of last year’s pace. USDA expects all 2020/21 U.S. wheat exports will total 25.9 MMT, down 2% from 2019/20, if realized.

Western Texas and northern Oklahoma received welcome rain with some minor drought relief, but overall large swaths of the area remain too dry. Much of the Midwest saw minor drought conditions extended. Across the High Plains, abundant rain was widespread and brought improvement to areas that were dry. Some concentrated showers fell in southwestern Kansas and southeastern Colorado, but across other parts of Kansas and Nebraska, dryness and drought expanded. Cooler weather and rain brought excellent conditions to the wheat-growing areas of Washington, Oregon and Idaho.

USDA now expects total world wheat production will reach 769 MMT, 4 MT less than its June estimate, but still slightly higher than last year’s record of 765 MMT. Total global wheat ending stocks fell slightly from the June estimate to 315 MMT, still a world record and 6% more than last year.

The French farm office, FranceAgriMer, predicts soft (non-durum) wheat exports from France to buyers outside the EU will plunge 43 percent in 2020/21, the lowest level since 2016/17. The harvest is expected to shrink by 21 percent this year following a wet autumn and a historically hot, dry spring. This follows a historic 2019/20 for EU wheat exports, which jumped 68 percent compared to 2018/19.

Heavy rain in many of the key growing areas of Canada caused little damage to crops reported the Canadian agriculture ministry. Crops in Saskatchewan were seen as developing normally for the last week of June. In Alberta, overall crop conditions were rated at 80 percent good to excellent compared to 70 percent last year. In Manitoba, however, the effects of excessive moisture was still being assessed. Canadian wheat production is expected to be up 5 percent this year compared to last year.

The Russian Agriculture Minister, Dmitry Patrushev, said Russia would use a quota mechanism to control wheat exports in the second half of the marketing year. The government will meet with the grain trade to agree on the limit after the harvest results are made available. Patrushev added that he wants the quota mechanism to be used on a “regular basis” as demand for Russian grains on the world market grows so that supply remains for the domestic market. Russia is expected to produce 75.0 MMT of wheat in 2020/21 and expected to export around 35 MMT of wheat.

As harvest season gets underway in the Black Sea region, the cost of freight for Panamax-size vessels jumped. Sources said the demand in the North Atlantic was slow the first half of the year, leaving many cargoes in the Far East, far from where they are needed. Prices for July shipment from Ukraine to China climbed $28.85/mt, Ukraine to North Africa surged 9 percent.

Scant rain across many of Argentina’s main planting areas is slowing wheat planting. Farmers were able to get nearly 8% of expected area planted this week, bringing the current total to 86.8% of a projected 6.5 million hectares (16.0 million acres). Rosario grains exchange cut the 2020/21 wheat crop forecast to 18-19 MMT from 21-22 MMT previously predicted following prolonged dryness.

ProAgro, an agriculture consultancy, cut its 2020 wheat harvest estimate for Ukraine slightly to 26.0 MMT from 26.6 MMT. Year-on-year Ukraine is expected to harvest 8 percent less wheat due to poor weather. Dry weather in some areas of the country cut yield while wet weather in other areas led to poor quality.

Wheat acres in Britain are down 25 % for the year after wet autumn weather pushed many farmers to have to switch to spring planting. Wheat planting was predicted to be 1.36 million hectares (3.9 million acres). Despite a wet autumn, the spring was mostly dry, further complicating wheat planting. The wheat harvest is expected to be around 10.0 MMT down from the 16.3 MMT harvested in 2019.

The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials like grains, coal and iron ore fell slightly week-over-week to end at 1,810.