Wheat Market Outlook and Prices

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Wheat Market Outlook – September 23, 2024

International Grain Council: September 2024 Grain Market Report

• In its September Grain Market Report (GMR), the International Grain Council (IGC) decreased global production while increasing trade and ending stocks.
• Global wheat production was lowered by 1.2 million mt from the July GMR to 798 million mt, up 3 million mt from last year. The decrease was led by a 2.6 million mt decrease in EU production to 122.4 million mt. Canada’s production was also half million mt less at 34.3 million mt. These reductions were partially offset by a 1.7 million mt boost in Australian production to 31.8 million mt.
• Smaller production was entirely offset by a 2.7 million mt increase in the carry-in. Thus, total supply rose by 1.5 million mt to 1,070 million mt, down one per cent year-over-year.
• Global trade was set 2 million mt higher at 198 million mt. Use was essentially unchanged.
• The larger supply and unchanged use caused the IGC to increase ending stocks by 1.0 million mt from July to 267 million mt, down two per cent from last year.

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FOB Cash Values

• Global cash wheat prices were lower last week, pressured by cheap wheat in the Black Sea.

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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 568-4, up 3-0 cents on Friday, down 26-2 cents on the week.
• 2024 contract Kansas hard red winter wheat closed at 564-0, down 0-4 cents on Friday, down 36-0 cents on the week.
• 2024 Minneapolis hard red spring wheat closed at 608-0, up 0-2 cents on Friday, down 27-4 cents on the week.
• S wheat futures are currently trading 8-13 cents higher at the time of writing.

Canadian Wheat

• Harvest progress: The spring wheat harvest continued in Canada last week despite rain in all three of the prairie provinces. Harvest progress of the spring wheat crop rose 11 per cent in Saskatchewan to 81 per cent complete. Harvest in Alberta rose 9 per cent to 79 per cent complete, while Manitoba farmers harvested 19 per cent of the crop, now at to 87 per cent complete.
• Wheat Quality: Manitoba Ag mentioned that there is some bleaching from the rains and fusarium is causing some samples to be reduced to a No. 2. There was no update on quality from Saskatchewan or Alberta which reported last week that quality was below average.
• Weekly Canadian wheat exports picked up some steam in week six. There were 406.5k mt of wheat exports during the week and deliveries were also quite large at 737.9k mt.

Canadian Durum

• Durum harvest in Saskatchewan rose 9 per cent over the week to 93 per cent complete. Alberta Ag did not update durum harvest progress. There was no further clarity given on the yield or crop quality.
• Weekly durum exports in week six were 15.2k mt for a season total of 232.7k mt, and inline with last year-to-date.

Global Durum

• Despite the smaller than expected harvest in Canada and the EU, global durum production is set to be larger than last year with strong increases in Canada (up 1.7 million mt, or 40 per cent), Turkey (up 600k mt, or 15 per cent), and the U.S. (up 480k mt, or 30 per cent). Meanwhile, the production shortfalls in the EU and Russia have not been as large. Overall, we expect that durum production in the major exporting nations will be around 22.7 million mt, ~16 per cent (3.0 million mt) more than last year’s.

• Meanwhile, durum production in some of the top importing nations – specifically those that tend to import from Canada – is expected to decline by a combined total of about 500k mt, down 14 per cent from last year. Each of the countries in the graph below have imported large volumes of Canadian durum in the past. However, with the emergence of Turkey as a durum supplier, Tunisia did not import any Canadian durum last year and Italy and Algeria only imported 33 per cent and 73 per cent of the previous year’s volume respectively.
• Italy has shown some good early demand in the U.S. data. Italy has bought a total of 78k mt of U.S. durum year-to-date. This is almost 50 per cent of last year’s volume for the entire marketing year.

• The durum market will be better supplied this year and there will be strong competition in the export market. Selling opportunities should be considered.

 U.S. Wheat

• U.S. wheat futures were lower last week on profit taking and cheap Russian wheat in the Black Sea.
• Spring wheat harvest in the U.S. increased 7 per cent over the week to 92 per cent complete. The average quality of the HRS crop continues to be No. 1 NS.
• Durum harvest in the U.S. is nearly complete. The average quality of the U.S. crop remains a No. 1 HAD.
• U.S. winter wheat seeding increased 8 points over the week to 14 per cent complete. The U.S. Southern Plains remain warm and dry which is bringing concerns for the fall seeding program. There was some rain in the Northern and Northwestern States. The U.S. drought monitor showed 58 per cent of the U.S. winter wheat area is experiencing drought conditions.

• U.S. wheat sales were below even the lowest trade guess at 246.3k mt. Total commitments are now 11 million mt, 28 per cent ahead of last year.
• U.S. HRS for Oct. 2024 is valued at $282.00mt FOB PNW (up $2.00/mt from last week), FOB Gulf HRW 12/13.5 pro is valued at $273.00/mt (down $1.00/mt from last week); Gulf HRW 11/12.5 pro is at $266.00/mt (down $1.00/mt from last week).

Australian Wheat

• There was localized frost in Australia. The overall impact on wheat is expected to be small.
• Forecasters suggest that Australia’s La Nina will be short and weak.
• FOB values in Australia: Oct. 2024 APW, WA was valued at $259.00/mt (up $1.00/mt from last week).

Argentine Wheat

• The condition of Argentina’s wheat fell sharply from 47 per cent to 35 per cent Gd/Ex. BAGE left its crop estimate unchanged.
• FOB Argentine 12 pro wheat upriver for Oct. 2024 is $263.00/mt (down $1.00/mt from last week).

Brazilian Wheat

• The wheat harvest in Brazil went up just 3 per cent over the week to 18 per cent complete. CONAB is expecting the second largest wheat crop in history at 8.8 million mt, up 800k mt from last year.
• Brazil added 250,000 mt to the Mercosur tariff free wheat quota after nearly filling the current 750,000 mt quota. The additional quota is in place until the end the calendar year. Mercosur is a South American trading bloc comprised of Argentina, Bolivia, Brazil, Paraguay and Uruguay. The extra quota will likely aid U.S. exports.

EU Wheat

• France Agrimer put the country’s wheat crop at 27 million mt. This is slightly below both the USDA at 27.5 million mt and the EU Commission at 27.3 million mt. Durum production is expected to be 1.1 million mt of this. The French soft wheat carry-out is still expected to be large at 2.7 million mt.
• The adverse growing conditions in France also impacted the quality of the wheat crop. Just 41 per cent of the French soft wheat crop had an average protein of 11.5 per cent, down from 58 per cent last year. Twenty-eight percent of the crop has test weights above 76kg/hl.
• EU FOB prices: 2024 French 11 pro wheat closed at $247.00/mt (down $4.00/mt from last week); Oct. 2024 German 12.5 pro wheat closed at $244.00 (down $8.00/mt from last week); Oct. 2024 Baltic 12.5 pro wheat closed at $240.00/mt (down $4.00/mt from last week).

 Black Sea Wheat

• Dryness in Ukraine and Russia are threatening the winter wheat crops. Russian farmers have planted just 15.5 million acres of winter grains to date. This is the smallest area in over 10 years. Ukrainian farmers have seeded just 851k mt of winter wheat do date, down from 1.3 million acres this time last year.
• We have Russian FOB values for 12.5 per cent protein wheat for Oct. 2024 at $215.00/mt (down $1.00/mt from last week).

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Significant Purchases/Trades

There were no major purchases/tenders.

• Jordan bought 60k mt of December shipment wheat at $265.95/ mt.
• Tunisia bought 125k mt of October to November soft wheat at $245.83-$247.83. The soft wheat was likely from Russia or Ukraine at ~$210/mt FOB.
• Tunisia also bought 100k mt of durum at $338.68-$346.49. This is roughly U.S.$18.00/mt more than what they paid in July. Ocean freight is U.S.$11.00/ mt cheaper than in July, but rail freight quotes that we are getting (from Moose Jaw to Vancouver) are much higher than the July price. If correct, the price of the durum tender calculates to about CA$8.50/bu at the elevator in Saskatchewan, which is about the same as what Tunisia’s last purchase was worth.

• U.S. wheat sales were just 246.3k mt. Total commitments are now 11 million mt, 28 per cent ahead of last year.

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Significant Events Over the Past Week

• The Federal Reserve’s 50 basis point decrease in the interest rates was largely expected by the trade and had little impact on the markets. This was the first decrease in interest rates in four years.
• China has been buying large volumes of soybeans but has been completely absent in the corn market. This has been supportive for oilseeds, but negative for feed grains.
• The U.S. dollar index ended the week slightly lower at 100.7 following the decision by the Federal Reserve.

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Mercantile’s Weekly Outlook

According to Mercantile, the wheat market is decently supported as harvest pressure eases. With that said, Mercantile believes wheat prices will remain under pressure until values firm in the Black Sea and dryness in the Black Sea, the U.S., and Australia will need to be watched. Mercantile would store wheat and avoid additional sales until 2025.

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Canadian Primary Elevator Bids

in Canadian Dollars per Bu and per MILLION MT

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Grade Spreads

in Canadian Dollars per Bu and per MILLION MT

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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).

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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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