Fund selling, row crop harvest pressure wheat market

2012-10-05T14:37:00Z 2012-10-05T14:50:13Z Fund selling, row crop harvest pressure wheat marketBy MARK CONLON, Editor Farm and Ranch Guide
October 05, 2012 2:37 pm  • 

The latter half of September was a bit tough for many commodities, including wheat.

“The beginning of last week was especially rough for most commodities,” said Erica Olson, marketing specialist for the North Dakota Wheat Commission on Sept. 27. “We’ve seen a lot of fund selling bring down prices and also with the advancing corn and soybean harvests that has pressured prices as well.”

Spring wheat futures prices have been up and down last couple weeks which has been the trend the last couple months, according to Olson. Futures have been trading in the range of $9.20 to $9.60 lately. Local cash cash prices are around $8.10 and $8.45 with an average of $8.30.

“We still have some supportive factors affecting the market,” Olson said. “Of course everyone continues to talk about Russia. One day someone says they’ll have export restrictions and the next day they say they won’t. It really depends on the day and who’s doing the talking.”

Either way, analysts expect exports start will start to slow from Russia given their production shortfall this year and prices have been increasing.

“Actually, Egypt recently bought wheat from France and Romania and none from Russia, so we are starting to see those shifts in trade and hopefully the U.S. will get some of those sales eventually,” she said.

Another item the market is keeping a close watch on is the dry condition in Australia. USDA estimates production there at 955 million bushels, however, some analysts think it could go as low as 770 million bushels which, obviously, would be quite a bit lower.

Also, in Argentina they’re saying wheat acres dropped about 20 percent this year, which means there will definitely be smaller production numbers from the southern hemisphere this year.

In the U.S., drought continues to plague much of the country; however, parts of the winter wheat region have received some rain which has helped for fall planting. But the crop will need more rain throughout the growing season.

About 25 percent of hard red winter wheat crop has been planted in the U.S.,which is about average.

“The big question is not if it will get planted, but what the yields will come out as,” Olson said.

In the upper Midwest the hard red spring wheat harvest is complete and final quality data should be available soon.

“So far we’ve seen very good protein, strong test weights and very minimal damage, so the next step will be to see what the milling and baking quality is,” Olson said.

In USDA’s Small Grain Summary released on Sept. 28, spring wheat production went up about 42 million bushels from the last estimate to reach 505 million bushels.

“This wasn’t unexpected given the good yields we saw at harvest,” she said.

The yield number came in at 45 million bushels per acre, up from 37.7 last year. A slight surprise in the report was that USDA actually raised planted acreage by 600,000 acres to 12.3 million. North Dakota accounted for 250,000 of the increase.

“So it looks like we have more spring wheat on hand, but the market was expecting that,” she said.

“The wheat stocks number will be supportive for prices,” she continued. “All wheat stocks as of Sept. 1 are estimated at 2.1 billion bushels, quite a bit lower than the average trade guess of 2.3 billion. The three-month disappearance was 27 percent higher than a year ago, quite possibly due to some increased feed usage.”

In terms of export demand, the last week of September saw total U.S. wheat sales at just under 16 million bushels. About 30 percent of that was hard red spring wheat. Large buyers for spring wheat included the Philippines, Thailand, Japan and Korea.

As of Sept. 27, total sales of spring wheat have reached 123 million bushels. That’s down about 11 percent from last year at this time. USDA is projecting sales of 240 million bushels for the year so we are just over half of that estimate.

“We’re hoping, especially in the second half of the marketing year, to see exports pick up,” Olson said. “One big uncertainty is the situation with PNW (Pacific Northwest) ports and possible labor strikes. They have only a few more days until the current contract with the union expires. Obviously, if nothing is worked out and there’s a strike, that would effect our ability to get out timely shipments.”

North of the border, the Canadian spring wheat harvest is nearing completion as well. Indications are that they have higher than average protein and the market is well aware of this, according to Olson. As a result, the protein premiums have all but disappeared.

“Overall we’re expecting a good quality North American crop and so it will be interesting to see how demand develops as the year progresses,” she said.

Copyright 2015 Farm and Ranch Guide. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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