Wheat Market Outlook and Prices

---

Wheat Market Outlook – July 8, 2024

• In the July Market Monitor, AMIS increased global wheat production by 2.4 million mt from June to 789.1 million mt. This now reflects a 1.0 million mt rise in production from last year. The higher estimate was brought on by larger expected crops in China, India, Kazakhstan, Pakistan, Turkey, and Ukraine, which off-set smaller crops in Russia.
• AMIS increased global wheat use by 1.5 million mt, largely driven by more supply in the Middle East.
• Trade was seen falling by 900k mt because of fewer imports from Turkey, and subsequently smaller exports by Russia.
• Ending stocks were raised by 1.6 million mt from June to 308.4 million mt. This still reflects a 1.4 percent decline in stocks from the previous year.

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 on last week’s market events in the major wheat origins.

Futures:

• Sept 2024 contract Chicago winter wheat closed at 590-4, up 16-4 cents on Friday, up 11-0 cents on the week.
• Sept 2024 contract Kansas hard red winter wheat closed at 599-0, up 15-4 cents on Friday, up 2-2 cents on the week.
• Sept 2024 Minneapolis hard red spring wheat closed at 633-2, up 10-4 cents on Friday, up 15-2 cents on the week.
• S. wheat futures are currently trading 16-21 cents lower on improved weather and expectations for better crop conditions.

Canadian Wheat:

• Alberta Agriculture says the condition of the AB spring wheat crop improved by 2 points over the week to 79 percent Gd/Ex compared to 45 percent Gd/Ex this time last year. Sask Ag did not update its crop ratings.
• Non-durum wheat exports in May were lower than the record volume shipped in April at 1.8 million mt. The top destination was Indonesia, which imported 225.2k mt of the total volume. From Aug-May, Indonesia has imported 2.0 million mt of non-durum wheat from Canada, up 24 percent from the same period last year. Exports to China in May dropped to 108.4k mt over the month which is almost one third of the average monthly volume they have been importing so far this marketing year. China remains the top customer for Canadian wheat, having imported a year-to-date total of 2.7 million mt, up 1 percent from last year.

• Canadian exports in week 48 were 335.2k mt for a season total of 19.8 million mt. Canada needs to ship 642.2k mt of wheat in the 4 remaining weeks of the marketing year to meet AAFC’s 20.4 million mt estimate. Meanwhile, there are 1.7 million mt of visible supply in the Canadian grain system, and 876.8k mt of this is sitting in port positions.

• Canadian Durum: Alberta Agriculture says its durum crop is 79 percent Gd/Ex, up 3 percent from June 18th. While conditions in Western Canada are conducive for a large crop, it is also conducive for Fusarium Head Blight disease, which gives rise to questions about the quality of the crop.

• Monthly durum exports were lower in May as they seasonally tend to be. Monthly exports were 295.8k mt with 111.1k mt of the total being shipped to Algeria. Algeria remains Canada’s top customer for durum this year despite having imported just 85 percent of last year’s volume. Italy (last year’s top customer) has only imported 29 percent of the 1.2 million mt they had imported during Aug-May last season.

• Weekly Canadian durum exports were large at 96.6k mt. With 4 weeks remaining in the export season, total durum exports are now 3.3 million mt which is what the AAFC was estimating for total exports. Producers delivered 69.2k mt of durum and there is 110.5k mt visible supplies sitting in export positions.

• International Durum: Global durum prices continue to decline. Tunisia bought 50k mt of durum at $329.67 and $331.49 CIF. We calculate this is worth about CA$8.50/bu at the elevator in Saskatchewan.

• There is ongoing conversation about the Turkish wheat crop. After a fantastic start to the growing season, hot and dry conditions developed across the country during the grain filling period. It still is hard to define the impact this will have on the crop. Vegetation imagery for the country indicate that the crop has been affected, especially in the major wheat producing area of Central Anatolia. Harvest has started in Turkey, but we have not heard of any yield results.

• In June, the Turkish government implemented a FOB $360/mt price floor on Turkish durum exports. This is well above the price traded at the most recent tender by Tunisia. We have heard rumours, however, that Turkey has sold some durum to Italy at $340-$350/mt CIF (despite the price floor). This calculates to about CA$9.15/bu at the elevator in Saskatchewan.
• Durum wheat production ideas are falling in the EU. In its June bulletin, MARS estimated that the EU durum crop would be 6.5 million mt, down 8 percent from last year and 12 percent less than the 5-year average.
• The durum market is a tough call. Production decreases in the EU and Turkey are supportive, but the Turkish crop is still supposed to be quite large (as well as the Canadian and US crops). We are 45 percent sold new crop production and content to hold tight for now. If undersold, we would hesitate to sell new crop at current values given the outlook for the wheat complex and the smaller EU crop. With that said, the durum market should be well supplied this year, and you should take advantage of any profitable opportunities that may present themselves.

 

U.S. Wheat:

• S. wheat futures were higher last week from better-than-expected sales performance.
• The USDA Crop Progress Report showed the condition of the U.S. winter wheat crop declined by a point to 51 percent Gd/Ex (vs 40 percent Gd/Ex last year). The condition of the U.S. spring wheat crop fell by a point over the week to 72 percent Gd/Ex (vs 48 percent Gd/Ex last year). For durum, conditions in Montana fell 3 percent to 56 percent Gd/Ex while North Dakota’s crop improved by 3 percent to 79 percent Gd/Ex.
• Hot and dry conditions are speeding harvest progress which jumped to 54 percent complete. Harvest in Kansas is nearing completion at 80 percent complete. Yield results are strong, which have many believing that the USDA will increase wheat production ideas in Friday’s report.
• S. weekly wheat sales were a marketing year high of 805k mt, beating even the loftiest of trade guesses (this is the second week in a row this has happened). Total commitments are now 49 percent ahead of last year, compared to the USDA’s estimate for an 11 percent increase. The Philippines and Mexico were the big buyers last week.
• S HRS for Sept 2024 was valued at $262.00mt FOB PNW (up $4.00/mt from last week), FOB Gulf HRW 11/12.5 pro is valued at $262.00/mt (down $3.00/mt from last week).

 

Australian Wheat:

• There was widespread rain in Australia last week, which will aid production prospects there.
• Estimates for Australia’s crop range from 29-33 million mt (up 3-7 million mt) compared to the USDA and ABARES’ 29 million mt estimates.
• FOB values in Australia: Sept 2024 APW, WA is valued at $310.00/mt (unchanged from last week).

 

Argentine Wheat:

• Wheat seeding progress in Argentina rose by 4 percent over the week to 85 percent complete.
• FOB Argentine wheat (11.5 percent pro) for Sept 2024 was valued at $284.00/mt (down $2.00/mt from last week).

Indian Wheat:

• India announced the country has harvested its largest wheat crop ever of 112.92 million mt. Local price signals seem to dispute this claim as cash markets in India are at an 8-month high.

 

EU Wheat:

• Winter barley yields in France are 15-20 percent below average, and early wheat yields have been disappointing. Estimates for French soft wheat yields are the lowest in 8 years with corresponding production estimates at 28.1 million mt compared to 35.1 million mt last year.
• Officials in Czechia are estimating the country’s wheat crop will be 4.6 million mt compared to 5.2 million mt last year.
• Harvest in Romania and Bulgaria are early and advancing well. Yields and quality are strong.
• EU Fob prices: Sept 2024 French 11 pro wheat closed at $238.00/mt (up $1.00/mt from last week); Sept 2024 German 12.5 pro wheat closed at $241.00 (down $3.00/mt from last week); Sept 2024 Baltic 12.5 pro wheat closed at $238.00/mt (unchanged from last week).

 

Black Sea Wheat:

• Russian cash wheat prices continue to decline under harvest pressure and the absence of Turkish demand. Putin and Erdogan meet last week, and traders are hoping they discussed lifting the import ban before the scheduled date in October.
• The jury is still out on the size of the Russian crop. In reality the June estimates have a small correlation with the final yield. If Russian prices, which have been falling over the past two weeks, are any indication, the size of the crop seems to be adequate.
• We have Russian Fob values for 12.5 percent protein wheat for Sept 2024 at $218.00/mt (down $8.00/mt from last week).

 

• Significant purchases/ trades:
• Tunisia bought 100k mt of soft wheat at $244.77-$248.50 CIF. Execution was likely Russia or Ukraine. Tunisia also bought 50k mt of durum at $329.67-$331.49.
• Algeria is tendering now for what is expected to be a moderate volume of September shipment wheat.
• S. sales were a marketing year high of 805k mt.

 

Wheat Market Outlook:

Significant events over the past week:

• Tunisia is in conversation with Russia about organizing government-to-government deals in a possible attempt to move away from public tenders.
• Russian cash prices were lower last week under harvest pressure and the lack of demand form Iraq, Pakistan, and Turkey.

Outlook:

According to Mercantile, activity in Russia indicates that the shortfall in production was not huge and Russian traders are eager to make up for the business they missed because of the floor price. Additionally, they need to find markets outside of Iraq, Pakistan, and Turkey which usually provide strong early demand. Meanwhile, smaller crops in France mean that farmers are reluctant to sell. Harvest pressure for wheat is building, while buyers have little-to-no cover. Mercantile thinks the sellers will be more aggressive, so expect futures will be weaker. However, they would hold cash sales for now as long as producers are ok for space and cash flow.

iii)  Primary Elevator Price Tables and Grade Spreads

PDF Download Wheat Market Outlook - July 8, 2024 July 8, 2024 Report