Wheat Market Outlook and Prices

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

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Wheat Market Outlook – October 1, 2024

USDA Final U.S. Wheat Production Numbers and Small Grains Summary

Source: USDA

  • The Annual Small Grains Summary showed all U.S. wheat production at 1.971 billion bushels (bu), which was down 11 million bu from the August Crop Production report. The 2024 wheat production is 159 million bu bigger than the 2023 crop (+8.8 per cent).
    • Hard Red Winter production was down 6 million bu from the previous report to 770 million bu.
    • Soft Red Winter output was steady at 342 million bu.
    • White winter down 7 at 236 million bu.
    • Spring wheat is pegged at 542 million bu down two from the previous year.
    • Durum was up 3 million bu to 80 million bu. Durum is up by 21 million bu from 2023 (+35.6 per cent).

 FOB Cash Values

Source: Mercantile

  • Global cash wheat prices were generally higher last week. Importantly, Russian wheat values appreciated by ~$8/mt.

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

  • 2024 contract Chicago winter wheat closed at $580-0, down 4-2 cents on Friday, up 11-4 cents on the week.
  • 2024 contract Kansas winter wheat closed at $564-0, down 2-2 cents on Friday, up 12-6 cents on the week.
  • 2024 Minneapolis hard red spring wheat closed at $608-2, down 3-2 cents on Friday, down 1-2 cents on the week.

Canadian Wheat

  • SK wheat is 85 per cent combined, with another 11 per cent ready to be straight combined. Alberta (Alta.) wheat is 87 per cent combined, with an overall average Alta. yield estimate of just 45.4 bu/acre.
  • The U.S. Hard Red Spring (HRS) harvest is virtually complete, and the overall average HRS grade is U.S. No. 1 Northern Spring (NS).
  • Canadian wheat exports in week seven were at a mediocre 306k mt but producer deliveries were at 537k mt and terminal deliveries at a very good 743k mt. The West Coast Grain Workers Union (GWU) strike was settled over the weekend, but it again interrupted the grain flow.

Source: Mercantile, based on CGC data

  • Regarding statistics updates, we received the AAFC balance sheets last week. For wheat (excluding durum), there were several significant changes. Starting with the 2023/2024 crop, the 2023 production was increased by 950k mt, and supply by a whopping 2.8 million mt (yes, 2.8 million mt due to an increase in carry-in of 2 million mt). Exports were lifted by 373k mt to 21.8 million mt, but 2023/2024 ending stocks rose to 4 million mt (vs. 2 million mt in the August report). The size of the changes is startling. Backward changes to the previous crop distort the signals given to farmers when making cropping and marketing decisions.
  • For the 2024/2025 crop, production was reduced slightly (-59k mt) to 28.36 million mt. However, supply increased by 1.9 million mt due to the increased carry-in from last crop year to 32.4 million mt (30.5 million mt in Aug.). Exports for 2024/2025 are stated at 20.5 million mt leaving us with 4 million mt of ending stocks (vs. 2 million mt in their August 20 report.) In other words, AAFC increased their projection for the 2024/2025 stock use ratio from 6.8 per cent to 13.4 per cent. For the 2024/2025 year, AAFC changed it from 7 per cent to 14 per cent.

Canadian Durum

  • SK durum is 94 per cent combined, with another 3 per cent ready to be straight combined. Alta. durum is 93 per cent combined.
  • The U.S. durum harvest is virtually complete, and the overall average durum grade is U.S. No. 1 Hard Amber Durum (1 HAD). In the Monday USDA stocks report, U.S. durum stocks were up 3 million bu from the September report to 80 million bu.

Exports

  • Week seven was good at 72k mt. Producer deliveries at 90k mt and terminal deliveries at 85k mt were quite good as well. Around 59k mt of the exports were shipped via the east coast (Thunder Bay & St. Lawrence).
  • YTD exports are well ahead of last year’s (+31 per cent).

  • The September AAFC balance sheet on durum also showed several changes. Starting with the 2023/2024 crop, the 2023 supply was increased by 187k mt due to an increase in carry-in. 2023/2024 ending stocks rose to 576 mt (vs. 325k mt in the August report).
  • For the 2024/2025 crop, supply increased by 246k mt due to the increased carry-in from last crop year to 6.635 million mt (6.39 million mt in August). Exports for 2024/2025 remained at 4.8 million mt, leaving us with 1.05 million mt of ending stocks (vs. 800k mt in the AAFC August 20 report.)
  • We reviewed the Canadian export markets in last week’s report, and there is not much new to add today.
  • The durum market will be better supplied this year and there will be strong competition in the export market.

U.S. Wheat

  • All three exchanges were a bit lower on Friday, though Chicago and Kansas gained for the week.
  • U.S. export sales of 535k mt (expectations were 600k mt – 1.3 million mt) took commitments for all wheat exports to 11.3 million mt, a four-year high and 17 per cent above last year’s. This represents 50 per cent of the USDA export projection, which lags the 54 per cent of the five-year average sales pace for the current week.
  • The annual Small Grains Summary showed all wheat production at 1.971 billion bushels, which was down 11 from the August Crop Production report. Hard Red Winter production was down 6 million bu to 770 million bu, Soft Red Wheat output was steady at 342 million bu, and white winter down 7 million bu to 236 million bu. Spring wheat is pegged at 542 million bu down 2 million bu from August. Durum was up 3 million bu to 80 million bu.
  • We also got a look at first quarter demand, with 1, 2024, stocks coming in at just over 1.9 million bu. This was slightly above trade guesses and 200 million bu above a year ago.
  • U.S. HRS for Nov. 2024 is valued at $289.00mt FOB Pacific North West (up $7.00/mt from last week), FOB Gulf HRW 12/13.5 pro is valued at $284.00/mt (up $11.00/mt from last week); Gulf HRW 11/12.5 pro is at $268.00/mt (up $2.00/mt from last week).

Australian Wheat

  • In Australia, frost and regional dryness have tempered production ideas, but crops in many cases still look very good and some local production ideas are still at or above the USDA’s 32 million mt September forecast.
  • Australia should see some welcome rains over most crop areas, with temperatures turning slightly warmer.
  • FOB values in Australia: Nov. 2024 Australia Premium White Wheat (APW), Western Australia (WA) was valued at $263.00/mt (up $4.00/mt from last week).

Argentine Wheat

  • Argentine markets were a little firmer with Rosario Dec futures closing $2 to $217.
  • Week two in the forecast shows some rain, but soil moisture is continuing to fall as wheat enters the heading/filling stage.
  • The Buenos Aires Grains Exchange (BAGE) raised Argentine Gd/Exc ratings slightly from 35 per cent to 36 per cent (22 per cent last season), but “Poor” ratings also increased to 32 per cent from 29 per cent, and the share of the crop with below optimal soil moisture increased to 53 per cent from 51 per cent. BAGE left the crop at 18.6 million mt after last week’s questionable 500k mt increase.
  • FOB Argentine 12 pro wheat upriver for Nov. 2024 is $266.00/mt (up $3.00/mt from last week).

EU Wheat

  • Matif closed up €2/mt yesterday, but the Dec.-Mar. spread widened back out to an €11/tonne carry.
  • The European Commission (EC) estimates the EU wheat production at 114.6 million mt, down 1.5 million mt from the previous month. The EC trimmed ending stocks by 800k mt to 11.7 million mt.
  • The market didn’t react a lot to the EU Commission’s balance sheet update and the reduction in crop size to an 11-year low.
  • COCERAL’s EU crop estimate of 122.5 million mt was below both the EU Commission and USDA estimates.
  • FranceAgriMer estimated the French soft wheat crop at 1 per cent planted as of Sept. 23, 2024.
  • EU FOB prices: 2024 French 11 pro wheat closed at $251.00/mt (up $4.00/mt from last week); Nov. 2024 German 12.5 pro wheat closed at $252.00 (up $8.00/mt from last week); Nov. 2024 Baltic 12.5 pro wheat closed at $248.00/mt (up $8.00/mt from last week).

 Black Sea Wheat

  • Russian FOB prices are well supported, and CPT prices also gained on last week’s levels to place October around the low $220’s. November was in the mid-$220’s whilst there were potential buyers indicating the high $220’s/low $230’s for December and January.
  • Farmer selling appears to be an important ingredient to price strength in both Ukraine and Russia, with Algerian buyers struggling to find offers. Farmer reluctance likely stems from the still dry planting conditions in the winter wheat regions of Southern Russia.
  • New crop plantings remain the primary concern with little or no rain in the forecast for the coming two weeks. However, much of Romania, Bulgaria and Western Ukraine are getting good rains.
  • We have Russian FOB values for 12.5 per cent protein wheat for Nov. 2024 at $223.00/mt (up $8.00/mt from last week).

Significant Purchases/Trades

There were no major purchases/ tenders.

  • Jordan tenders today (Oct. 1, 2024) for 120k mt milling wheat for Jan. 2025 shipment.
  • U.S. export sales of 535 k mt were below the trade guesses of 600-1,300 k mt, but the season total of 14.7 million mt remains 17 per cent above last year’s.

Significant Events

  • AAFC changed the Canadian wheat balance sheet substantially by adding to 2023 production and supply. Durum supply also increased somewhat.
  • In the U.S., the annual Small Grains Summary showed all wheat production at 1.9 billion bushels, which was down 11 from the August Crop Production report.
  • The European Commission (EC) estimates the EU wheat production at 114.6 million tonnes, down 1.5 million tonnes from the previous month. The EC trimmed ending stocks by 800k mt to 11.7 million mt.
  • In Australia, frost and regional dryness have tempered production ideas, but crops in many cases still look very good and some local production ideas are still at or above the USDA’s 32 million mt September forecast.
  • Importantly, Russian FOB prices are well supported, and CPT prices also gained on last week’s levels to place October around the low $220’s.
  • Growers have been strong holders and disputes in the Middle East showed signs of increasing in severity.

Mercantile’s Weekly Outlook

According to Mercantile, wheat futures increased across all three exchanges on Monday, as well as Russian FOB prices in the last week. The annual Small Grains Summary showed all wheat production at 1.9 billion bushels, which was down 11 million bu from the August Crop Production report. Year-to-date U.S. shipments sit at 8.2 million mt which is just more than 35 per cent higher than this time last year. Following Monday’s Stocks in all positions report, Mercantile notes the market will watch U.S. yields, Brazilian rain, EU/Black Sea crop size/quality and Chinese demand. Mercantile suggests growers stay patient.

Canadian Primary Elevator Bids

in Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Oct. 1, 2024

Grade Spreads

in Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Oct. 1, 2024

Relevant FOB Prices and Calculated Basis

U.S. & Canadian Dollars per MT

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

Disclaimer: The content of the Wheat Market Outlook Report and audio summary are the views and opinions of Mercantile Consulting and do not necessarily reflect the views and opinions of the Saskatchewan Wheat Development Commission.

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