Global cash wheat prices were generally lower last week, led by weakness in French wheat. A small crop, and poor growing conditions have priced French wheat out of the market. Farmers have been reluctant sellers which has contributed to EU exports lagging last year by 30 per cent.
Price indications last week suggest that Russian exporters are willing to sell below the “unofficial” price floor. We have Russian prices at $237/mt on a FOB basis. The Black Sea remains the cheapest wheat origin.
Looking over the month of October, wheat prices were mixed. North American wheat was higher, led by a strong rise in U.S. Hard Red Spring (HRS) wheat. Wheat prices in the southern hemisphere were generally lower in October on improved crop conditions. European wheat prices were mixed. French and German wheat was lower as it struggles to compete on the export market, while dryness in Russia’s winter wheat area and government controls allowed Russian wheat to rise over the month.
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 $569-0, down 12-4 cents on Friday, down 3-6 cents on the week.
2024 contract Kansas winter wheat closed at $572-0, down 15-0 cents on Friday, down 8-6 cents on the week.
2024 Minneapolis hard red spring wheat closed at $605-2, down 12-6 cents on Friday, down 11-2 cents on the week.
U.S. wheat futures are 4-7 cents lower at the time of writing given pressure in corn and beans, the better outlook for Argentina’s crop, and the addition of rain in the forecast for the U.S. wheat belt.
Canadian Wheat
Agriculture and Agri-Food Canada (AAFC) raised the 2023/2024 non-durum wheat ending stocks by 200k mt to 4.21 million mt. 2023/2024 exports and food use were higher, as all the increase in stocks was from smaller feed use. The increase in stocks was absorbed into the 2024/25 balance sheet, but with 100k mt increases in exports (now at 20.6 million mt) and feed use (now at 4 million mt). 2024/25 ending stocks were unchanged at 4 million mt, down 5 per cent from the AAFC’s new 202320/24 number. The size of changes that AAFC has made in the past two months are astounding.
Canadian exports in week 11 were smaller than the average pace to date at 233.6k mt. YTD exports are now 4 million mt which is 4 per cent behind last year. The AAFC’s new 20.6 million mt export estimate similarly reflects a 4 per cent decrease from last year.
Source: Mercantile, based on CGC data
Canadian Durum
AAFC increased durum use for 2023/2024 season. Exports, feed and food use were all higher as 2023/2024 ending stocks were reduced by 169k mt from last month to 407k mt. 2024/2025 supply was reduced accordingly. Feed use was slightly lower as 2024/2025 ending stocks were reduced by 150k mt to 900k mt. This is still over double the 2023/24 ending stocks volume, and the highest level since 2018/19.
Source: Mercantile, based on STC, AAFC, and Mercantile data
Canadian durum exports in week 11 were 72.2k mt. Total exports now stand at 665k mt, up 27 per cent on last year.
Source: Mercantile, based on CGC data
We are 45 per cent sold durum, and would target another 10 per cent at $10.00/bu.
U.S. Wheat
With little independent strength, U.S. wheat futures lost all the gains made at the start of the week and closed lower on Friday.
Weekly U.S. wheat sales were within trade expectations at 532.9k mt. Total commitments are now 13.1 million mt, which is 18 per cent ahead of last year.
Source: FAS
Most of the U.S. winter wheat areas received spotty rains over the week. It was not enough to break the drought. The area of the winter wheat crop that is under drought conditions was 58 per cent as of Oct. 22, 2024. U.S. farmers covered another 9 per cent of the country’s wheat area which is now 73 per cent seeded. Eleven percent of the crop has emerged. The forecast is calling for nearly complete dryness until early November.
U.S. HRS for Nov. 2024 is valued at $306.00mt FOB PNW (down $4.00/mt from last week), FOB Gulf Hard Red Winter (HRW) 12/13.5 pro is valued at $283.00/mt (down $7.00/mt from last week); Gulf HRW 11/12.5 pro is at $267.00/mt (down $7.00/mt from last week).
Australian Wheat
Harvest is gaining speed in Australia. Estimates for the Australian crop remain in a wide (28-33 million mt) range. The most recent estimate we heard of was from Rabobank which put the Aussie crop wheat crop at 27.6 million mt
FOB values in Australia: Nov. 2024 Australian Premium White Wheat (APW), WA was valued at $252.00/mt (down $5.00/mt from last week).
Argentine Wheat
Argentina received “crucial” rain last week. Buenos Aires Grain Exchange (BAGE) raised its condition ratings by 7 per cent to 38 per cent Gd/Ex. New crop wheat sales are 3.4 million mt and almost double last year’s volume for this time of year.
Harvest in Brazil continues to be slow where rain is delaying harvest progress amidst concerns about quality.
FOB Argentine 12 pro wheat upriver for Dec. 2024 is $235.00/mt (up $4.00/mt from last week).
EU Wheat
Despite French farmers on-going struggle to seed the wheat crop French milling wheat futures (MATIF) finished the week at a five-week low. EU wheat was too expensive at Tunisia’s tender, and EU wheat exports are running 30 per cent behind last year.
EU FOB prices: 2024 French 11 pro wheat closed at $243.00/mt (down $10.00/mt from last week); Nov. 2024 German 12.5 pro wheat closed at $248.00 (down $9.00/mt from last week); Nov. 2024 Baltic 12.5 pro wheat closed at $253.00/mt (down $8.00/mt from last week).
Black Sea Wheat
Recent activity from the Black Sea suggest that Russian traders are not respecting the government’s price floor.
We have Russian FOB values for 12.5 per cent protein wheat for Nov. 2024 at $237.00/mt (down $8.00/mt from last week).
Significant Purchases/Trades
Tunisia bought 125k mt of milling wheat at $263-$264/mt. The tender was likely filled primarily with Bulgarian and Ukrainian wheat.
Bangladesh tendered last week, but they issued another tender shortly afterward which signals they did not buy anything.
Egypt expects that a delayed purchase of 430k mt of Russian wheat will be delivered in November. The transaction was made through a direct purchase in September at $235/mt.
U.S. export sales of 532.9k mt were at the high end of expectations. Total commitments are now 18 per cent ahead of last year.
Significant Events Over the Past Week
Commodities Futures Trading Commission (CFTC) data showed Chicago wheat managed money spec funds added 2,902 contracts to its net short to 28,915 contracts.
Given the increased traffic resulting in the war in Ukraine, Romania plans to spend $162.5 million to upgrade its rail infrastructure in the port of Constanta. Constanta is set to become a major logistics hub as it has become an important route for Ukrainian exports since the start of the war.
Chinese grain output is expected to exceed the record 700 million mt this year. China has been making deliberate moves to boost farm income and develop the rural economy.
The U.S. dollar index rose for the fourth week in a row to 104.3. The strong dollar is a result of economic data which suggests interest rates will be largely steady moving forward.
Mercantile’s Weekly Outlook
According to Mercantile, Black Sea wheat remains the cheapest in the world, and Russian traders appear to be willing to ignore the government’s price floor. Wheat markets benefitted from the strength in corn and soybeans, but with little independent strength, Mercantile assumes wheat will be confined to a sideways range for now. Mercantile recommends targets to sell 25 per cent of their wheat production at $8.00/bu for a #2CWRS (depending on location).
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.