Wheat Market Outlook and Prices

The Wheat Market Outlook is provided by Mercantile Consulting Venture Inc.

Wheat Market Outlook Audio Summary

Marlene Boersch, Anthony Temple and Michael Wilton of Mercantile Consulting Venture Ltd. provide a weekly overview of the wheat market outlook. Below is an audio summary which is updated every week along with the written report.

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• Global Wheat Production and Trade

• Significant Purchases/Trades

• Significant Events

• Outlook

• Primary Elevator Price Tables and Grade Spreads

Wheat Market Outlook - April 15, 2024 

USDA Grain: World Markets and Trade

• Wheat from the European Union continues to struggle to compete on the global market. Large crops in Russia have allowed Russian wheat to dominate in markets that are traditionally filled with EU wheat.

• North Africa, Sub-Saharan Africa, and the Middle East are usually strong markets for EU wheat, but according to the USDA, July to January exports from the EU to the North Africa are down 25 per cent from last year. EU wheat exports to the Middle East are down 60 per cent year-over-year.

• Until the 2020/2021 marketing year, EU wheat commanded a 95 per cent share of the Saudi Arabia wheat market. Over the past two years, the share of EU wheat exported to Saudi Arabia has ranged from just over 15 per cent to under 35 per cent of all wheat imports.

• Similarly, EU wheat used to command 85 per cent of the market share in Algeria. In 2021/2022, the market share held by the EU fell to around 65 per cent. It was lower again in 2022/2023 at around 60 per cent. Meanwhile, just 50 per cent of July to Janunary wheat imports this marketing year have been comprised of EU wheat.

Global Cash Wheat:

• Global cash wheat prices in North America were lower while European values were lower in the EU, but stronger in the Black Sea. Stronger Black Sea values were driven by Russian execution problems.   

Global wheat production and trade

There is a lot of competition in the wheat markets as wheat is produced around the world. Below is a brief synopsis of last week’s market events in the major wheat origins.

Futures:

• May 2024 contract Chicago winter wheat closed at $556-0, up 4-2 cents on Friday, down 11-2 cents on the week.

• May 2024 contract Kansas hard red winter wheat closed at $589-6, up 6-4 cents on Friday, up 7-4 cents on the week.

• May 2024 Minneapolis hard red spring wheat closed at $642-6, up 5-6 cents on Friday, down 5-2 cents on the week.

• U.S. wheat futures are currently trading 5-8 cents lower at the time of writing this Monday morning.

Canadian Wheat:

• Canadian weekly exports: Week 36 wheat exports were excellent at 505.7k mt. The strong performance was partially due to the opening of the Great Lakes. The first ship of the season arrived at the Richardson International’s Port in Thunder Bay on Mar. 24, 2024, beating last year’s first ship of the season by two days, and tying the 2008 record for the earliest opening date for the port. Exports from the eastern ports accounted for 146.8k mt of the total week 36 volume. Year-to-date exports are now 14.8 million mt, which is six per cent above last year compared to the AAFC’s forecast for a two per cent decrease, and our estimate for a four per cent increase from last year.

• Durum: Week 36 durum exports were 90.2k mt and remain above the weekly pace needed to meet the AAFC’s 3.2 million mt export estimate. Exports for the remainder of the season need to average ~47.5k mt per week. Terminal receipts were split between the East and West coasts. There is 456.6k mt of visible supply in the elevator system. Most of this is in primary elevators and needs to make its way to export positions. There are however, 106.3k mt of durum sitting in the St. Lawrence.

• Focus on Turkey: Given that Turkish durum exports had a huge effect on the durum export markets this crop year, how this year’s (2024) Turkish durum crop is shaping up will be very important to the markets in the new crop year.

• According to a recent report by the U.S. ag attaché to Turkey, total Turkish 2024/2025 wheat production is forecast to remain unchanged from last year’s at 19.8 million mt. While acreage is up by ~50k ha (7.25 million ha), yields are expected to be down slightly in line with more normal weather. Of this total projected amount, nearly 4.4 million mt will be durum wheat, up 10 per cent on last year, as farmers seek to export a larger share of production to take advantage of relatively strong global prices for durum wheat.

• Importantly, 2024/2025 durum wheat exports are put at two million mt, assuming the government will again authorize the export of excess durum wheat. (2023/2024 durum exports are estimated at 1.5 million mt).

• Meanwhile, wheat imports this year by Turkey are only being used by the pasta and flour re-export business, because of the trade prohibitive tariff of 130 per cent on imported wheat, which has been in place since last May.

•  We are sold out of old crop durum. We recommend selling 30 per cent of expected new crop durum at the current price.

U.S. Wheat:

• USDA-WASDE report: For the global wheat balance sheet, the USDA decreased ending stocks by 600k mt as a 700k mt increase in production was offset by lower beginning stocks (-100k mt) and more use (+1.1 million mt). Most of the increase in production from last month was in the EU, where production was lifted by 500k mt. Global ending stocks at the end of 2023/2024 are now expected to be 258.3 million mt, which is five per cent less than last year and smaller than the average trade guess. Most of the decrease in stocks from last month were in the Black Sea, while ending stocks in the EU and U.S. were increased.

• U.S. wheat: The USDA left exports unchanged while decreases in feed use added 25 million bushels to ending stocks. The largest decrease in use was said to be in HRS where feed use was reduced by 20 million bushels. HRS ending stocks were said to be 20 million bushels higher at 197 million bushels, up 27 per cent from last year. U.S. wheat imports were reduced by five million bushels given lower imports, primarily of HRW. Ending stocks are now expected to be 698 million bushels which is 22 per cent more than last year and seven million bushels more than the average trade guess.

• Old crop U.S. wheat sales were within trade expectations at 81k mt. Total commitments are now 692 million bushels, up three per cent from last year (compared to the USDA’s unchanged estimate for a 4.5 per cent decline). There are eight weeks remaining in the U.S. wheat marketing year. There were 56k mt loaded for China last week, which leaves 555k mt of unshipped sales to China. New crop wheat sales were 274k mt, for a total commitment number of 57 million bushels. This is more than double last year’s volume to-date.

• Spring wheat planting in the U.S. is in-line with the average pace at three per cent complete. Farmers in Western Canada are slowly getting started this week (which is about a week early), and we expect seeding will be fairly widespread by the week of the 21st.

• The condition of the U.S. winter wheat crop was largely unchanged from last week at 56 per cent Gd/Ex.

• U.S. HRS for May 2024 was valued at $282.00mt FOB PNW (down $1.00/mt from last week), FOB Gulf HRW 11/12.5 pro is valued at $273.00/mt (up $4.00/mt from last week).

Australian Wheat:

• Australian futures prices were lower last week. The USDA left Australia’s production number at 26 million mt, but increased its exports by 500k mt. These resulted in a respective decrease in ending stocks to 3.1 million mt, down 30 per cent from last year.

• ABARES projects that Australia’s wheat area will rise by one-to-three per cent from last year given the La Nina and strong demand for China.

• FOB values in Australia: May 2024 APW, WA is valued at $250.00/mt (unchanged from last week).

Argentine Wheat:

• The only change the USDA made to Argentina’s wheat balance sheet was a 500k mt reduction to exports, resulting in a 500k mt increase in ending stocks. At 3.3 million mt, Argentina’s ending stocks are expected to shrink by just 18 per cent from last year.

• FOB Argentine wheat (12 per cent pro) for May 2024 was quoted at $219.00/mt (down $11.00/mt from last week).

Indian Wheat:

• The developing situation in India will be important to watch. The USDA increased 2023/2024 wheat consumption there by two million mt, and decreased imports by 130k mt. These revisions tightened India’s wheat balance sheet by another 2.1 million mt from last month. Ending stocks in India are expected to be 6.9 million mt, which is 27 per cent (-2.6 million mt) tighter than last year, and the lowest volume since 2007.

• The USDA Post in India is estimating that the current wheat harvest will produce a two per cent larger crop than the previous year of 112.5 million mt. Despite the record production, low beginning stocks will force the country to import what we believe will be upwards of two million mt of wheat in 2024/2025. India is estimated to have only imported 120k mt of wheat in 2023/2024. Unchanged use would mean ending stocks would grow slightly to 7.6 million mt which would be the second lowest volume in 17 years. Meanwhile, Indian millers think the crop will only be 105 million mt. This is too low from what we have heard.

EU Wheat:

• Wheat futures in the EU did not like the USDA increasing the EU ending stock number by another 1.5 million mt. Ending stocks in the EU are now expected to be 16.7 million mt, which is four per cent more than last year. The USDA’s ending stock estimate is still well below the EU Commission’s estimate of 21.1 million mt.

• Higher ending stocks in the EU were the result of offsetting changes in beginning stocks and production. Meanwhile, imports were raised by 0.5 million mt, feed use was up one million mt, but exports were down by two million mt.

• The condition of the French winter wheat crop fell another point over the week to 64 per cent Gd/Ex.

• EU FOB prices: May 2024 French 11 pro wheat closed at $217.00/mt (down $1.00/mt from last week); May 2024 German 12.5 pro wheat closed at $232.00 (down $2.00/mt from last week); May 2024 Baltic 12.5 pro wheat closed at $221.00/mt (down $2.00/mt from last week). m last week).

Black Sea Wheat:

• According to the USDA, Ukraine’s beginning stocks were decreased by 600k mt along with a 400k mt reduction in use. Exports were up by 1.5 million mt for a 1.7 million mt decrease in ending stocks.

• The USDA decreased Russian feed use by one million mt while increasing exports by one million mt. Ending stocks were left unchanged.

• Russian exporter, RIF Trading House, is suspending operations at its Azov Sea terminal due to disputes surrounding phytosanitary certifications.

• The Russian government increased the wheat export tax by 1.3 per cent to 95 cents per bushel for the period from Apr. 17-23.

• We have Russian FOB values for 12.5 per cent protein wheat for May 2024 at $212.00/mt (up $3.00/mt from last week).

Significant purchases/ trades:  

• We did not hear of any trades last week. Buyers seem to be largely covered for old crop. There has been no new crop business done as traders are concerned about the weather and farmers do not like the prices.

• Weekly U.S. commercial sales for the 2023/2024 marketing year were 81,000 mt. Sales for the 2024/2025 marketing year were 274,000 mt.

Significant events over the past week

• The funds bought back some of its short position in wheat but remain short wheat futures.

• There were no great surprises in the WASDE report, and it was a bit of a disappointment to the bulls which were expecting larger decreases, especially in South American corn production.

• Russia continues to bombard Ukraine with missiles and drones. Russia has moved its attention to key power plants, but also attacked the major port city of Odesa again last week.

• The breadth of countries exchanging rockets/drones has extended to destination grain markets. Iran launched a barrage of drones and missiles at Israel in response to their strike on the Iranian consulate in Syria.

Mercantile’s Outlook This Week:

Mercantile says the international climate remains fractious, particularly in the Middle East. Mercantile is slowly seeing energy prices increasing and inflation starting to rise. In their view, world buyers are largely finished with old crop purchases. Futures will be moved by whatever Funds or farmers need to do. Mercantile sees the old crop going lower as carrying charges increase, while there will be little trade in new crop while traders remain concerned about weather and growers don’t like the values. – Mercantile would target remaining old crop spring wheat at $0.10 above current values, but would not sell new crop wheat for now.

Canadian Primary Elevator Bids

Grade Spreads in Canadian Dollars

Relevant FOB Prices and Calculated Basis

CLICK HERE to learn what the basis is and why it is important (FOB Wheat Prices and Export Basis Calculation PDF).

For the archived wheat market outlook and price reports, please CLICK HERE.