- Technical buying and a strong rally in corn futures supported all wheat futures prices week-over-week. CBOT soft red winter (SRW) futures added 4 cents to end at $5.00/bu. KCBT hard red winter (HRW) futures gained 10 cents to close at $4.25/bu. MGE hard red spring (HRS) futures added 3 cents to end at $4.97/bu. CBOT corn futures increased 17 cents to close at $3.24/bu. CBOT soybeans gained 31 cents to close at $8.97/bu.
- Gulf HRS and Pacific Northwest (PNW) HRS and HRW export basis levels jumped significantly week-over-week for September and October deliveries due to limited export elevation capacity as U.S. corn and soybean exports to China ramp up. Historically high domestic secondary rail rates (see below) add support. In the PNW, the expectation of a much smaller HRW harvest in Montana (see below) adds additional support to HRW export basis.
- Secondary rail rates, which are paid to ship grain domestically on a secondary auction market in addition to the tariff rate, for October deliveries have jumped significantly since late July. USDA AMS data shows that the average secondary rail rate for shuttle trains has increased 50% between July 31 and Aug. 13 to $800/car, nearly four times greater than the previous 3-year average. Significantly increased demand for domestic freight due to increased commodity exports to China and reduced shuttle train availability due to COVID-19 labor furloughs are driving the increase in secondary rail rates.
- According USDA’s August Crop Production report, total 2020 Montana HRW production may go down 21% to 2.05 MMT on significantly reduced planted area. However, HRW conditions remained strong and the state could see a record average yield per acre, weather permitting.
- In its August World Agricultural Supply and Demand Estimates (WASDE) report, USDA increased its HRS production forecast to 14.4 million metric tons (MMT), slightly more than last year. It also increased its U.S. durum production forecast to 1.69 MMT, 15% more than last year, if realized. USDA reduced its HRW production estimate to 18.9 MMT, down 17% from 2019/20, if realized. The SRW production forecast of 7.54 MMT would be 16% more than last year. Total white wheat production (soft and hard) is expected to increase slightly from last year to 7.46 MMT.
- The 2020 U.S. winter wheat harvest is nearly complete. The SRW harvest is over and preliminary lab samples show strong end use qualities, with higher test weights and falling number values than last year. The HRW harvest is 86% complete with only crops in Montana and the PNW left to cut. PNW HRW conditions remain very strong and above-average yields are expected. The PNW soft white (SW) harvest is well underway. Farmers in Washington have harvested 55% of the expected crop. Idaho’s SW crop is 35% harvested and Oregon’s harvest is 77% complete.
- To learn more about the 2020 U.S. wheat harvest, click here.
- Total U.S. spring wheat crop ratings fell slightly from last week to 69% good to excellent as of August 9 on persistent dryness across the Northern Plains. However, dry weather is helping advance the 2020 U.S. spring wheat harvest; South Dakota is nearly 75% complete, Minnesota is 19% harvested, North Dakota is 7% complete and Montana is about 15% harvested.
Commercial Sales
- This week’s commercial sales of 368,000 metric tons (MT) for delivery in 2020/21, as of August 6, were 39% less than last week’s 605,000 MT but in line with trade expectations of 250,000 MT to 800,000 MT. Year-to-date commercial sales now total 10.6 MMT, 8% ahead of last year’s pace.
- USDA now expects the United States will export 26.5 MMT of wheat in 2020/21, up from the July forecast of 25.9 MMT on lower expected production in key competitor countries mainly the European Union (see below).
- Click here to view the most recent USW Commercial Sales report.
- This week, rain reduced areas under extreme drought in portions of southeastern Colorado, although most of Colorado is extremely dry, and the Oklahoma Panhandle; it also helped alleviate abnormal dryness in central North Dakota. Meanwhile, severe drought spread from eastern Wyoming to the Nebraska Panhandle and moderate drought spread from central western Minnesota into northern South Dakota. Looking ahead, scattered rainfall is expected to reduce dryness across parts of the Northern and Southern Plains but not enough to slow the winter and spring wheat harvests in the northern states.
- USDA reduced its European Union (EU) total wheat production estimate by 1.50 MMT from its July WASDE report to 139 MMT in August, 12% below last year, if realized, on persistent dryness in France, Germany and Spain.
- On Aug. 11, the United Nations (UN) Office for the Coordination of Humanitarian Affairs announced the World Food Programme would send 50,000 MT of wheat flour to Lebanon to stabilize the country’s food supplies following last week’s devastating explosion in the Port of Beirut.
- As of Aug. 6, Ukraine’s 2020 wheat harvest is 87% complete at 23.1 MMT. USDA expects total Ukrainian wheat production will fall 9% on the year to 26.5 MMT on persistent dryness through the growing season. The country’s economy ministry expects Ukraine will export 17.2 MMT of wheat in 2020/21, in line with USDA’s forecast but 16% less than last year, if realized.
- Russian farmers have harvested 49.8 MMT of wheat as of August 8., 14% ahead of this time last year. According to the country’s Ministry of Agriculture, the total average yield is up slightly this year at 54.6 bu/acre (3.67 MT/ha).
- Argentinian wheat farmers are facing the worst drought in a decade, said the Rosario Board of Trade (BCR) Aug. 13. Farmers had intended to plant a record 17.3 million acres (7.0 million hectares) of wheat, but drought, heat and severe frosts brought total planted area down to 16.0 million acres (6.50 million hectares), 5% lower than last year. While USDA still expects the country will produce 21.0 MMT of wheat in 2020/21, BCR expects final production will fall in the range of 18.0 to 19.0 MMT.
Baltic and U.S. Dollar Indices
- The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials like grains, coal and iron ore increased slightly from last week to end at 1,577.
- The U.S. Dollar Index fell from last week’s 93.43 to close at 93.13.