Wheat Market Outlook – September 3, 2024

Australian wheat production estimates:

Source: USDA-FAS & Australian Government Est’s

According to the latest estimate by its government., Australia should produce 31.8 million mt of wheat in the upcoming harvest. The forecast was increased by 2.7 million mt following rain in key cropping regions.
- Estimates for the crop have been raised successively over the past three months while conditions have improved.
Australia is the world’s third-biggest wheat exporter, and a bigger harvest will increase global supply at a time when prices are near four-year lows.

FOB Cash Values:

Source: Mercantile

FOB values increased by up to $18/mt (CWRS and French wheat), but the Russian FOB value dropped by $2/mt, indicating Russia wants to stay very competitive.

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 551-4, up 2-6 cents on Friday, up 23-4 cents on the week.
2024 contract Kansas hard red winter wheat closed at 520-0, up 4-6 cents in Friday’s trade, up 30-2 cents on the week.
2024 Minneapolis hard red spring wheat closed at 600-4, up 10 cents on Friday, up 28-2 cents on the week.
In S. futures, wheat is currently up this Tuesday morning, from last week’s close (1-9 c/bu).

Canadian Wheat

Statistics Canada (STC) published their first production report on Aug. 28, 2024. For spring wheat STC used an average yield of 50.3 bu/ac (compared to 48.9 last yr.), which put Canadian spring wheat production at 25.3 million mt (just 170k mt below last year’s).
The pre-report estimate by the trade was at a significantly bigger 26.6 million mt, and Mercantile has been using 26.3 million mt. We thought that wheat had handled the heat better than, for example, canola, which was estimated higher than expected.
We will be watching the provincial assessments next to balance them with the StatsCan numbers. Incidentally, AB Ag reported 17 percent of their spring wheat harvested and assessed an average yield of 46.3 bu/acre, which was down from earlier estimates.

Wheat excluding durum was estimated at 34.4 million mt (based on a 48.5 bu/ac yield), which would be up 4.3 percent over last year’s crop. Pre-report trade estimates were also higher at 35.13 million mt. The numbers are hard to reconcile, because STC retroactively changed the 2022 and 2023 production numbers for wheat as well.
The U.S. HRS wheat market is paying record carries for 2024/2025 positions, which makes long term business prohibitively expensive for most consumers. Spot looks nice, Jan.-Mar., not so much.
At 169k mt, Canadian wheat exports in week three were poor for this time of year, which is likely a fallout from the rail strike. YTD numbers are still good thanks to the first two weeks of the crop year.

Markets are going the right way, but we will have to see if Black Sea values follow suit, or if they remain the spoiler.
Canadian Durum: SK Ag is showing durum 37 percent harvested. There were several storms going through the province delaying harvest and bringing big hail to some regions (especially Yellowgrass). SK Ag will come out with some yield forecasts next week. AB Ag called durum in their province 39 percent harvested and put avg. AB yields at 38.9 bu/acre. Preliminary dryland yield estimates have declined slightly over the past two weeks. Ab has about 19 percent of total durum acres, while SK has 81 percent of total durum acres.
In their report on Aug. 28th, Statistics Canada pegged Canadian durum production at 6 million mt based on yields of 35.8 bu/acre. This production number would exceed last year’s (adjusted production number) by 47.3 percent.
The pre-report estimate by the trade was at a 6.28 million mt mt, and Mercantile has been using 6.3 million mt. – Having said this, we think that durum in the south is not yielding well, and the final verdict on yields and on quality (especially with light grain) is still out there.
Meanwhile, preliminary numbers indicate that the combined Canadian – U.S. durum production will exceed last year’s by roughly 2.5 million mt, so we are dealing with a different supply situation than last year.
Durum exports for week 3 were at 31k mt, for a YTD total of 153k mt, well ahead of last year’s early start to the crop year.

We are facing a much better-supplied durum situation this year and will have to look for opportunities throughout the crop year. We are currently 45 percent sold.

U.S. Wheat:

In the U.S., the HRW harvest is all but complete. The SW crop is progressing quickly with favourable weather. And HRS harvest is over 60 percent complete with test weight average of 61.5 lb/bu (80.9 kg/hl) and average protein 14.0 percent (12 percent mb). The first northern durum samples are grading a U.S. No. 2 Hard Amber Durum.
The wheat complex was up across all three exchanges on Friday. There were 416 deliveries issued against September CBOT wheat futures on first notice day.
S. export sales at 532k mt were within expectations, and the season total of 366 million bu is 33 percent above last year, against the USDA’s projected 17 percent increase. Export sales were solid and helped to support demand ideas, with basis and spreads steady.
S. HRS for Sept. 2024 is valued at $246.00mt FOB PNW (unchanged from last week), FOB Gulf HRW 12/13.5 pro is valued at $266.00/mt (up $13/mt from last week); Gulf HRW 11/12.5 pro is at US$259/mt (up $13/mt from last week).

Australian Wheat:

Australian futures followed international markets higher despite increasingly optimistic crop expectations.
- January futures were higher at A$320.50/mt, but with offshore markets quiet/closed trade was minimal.
According to the latest ABARES estimate, Australia is expected to produce 31.8 million mt of wheat, up by 2.7 million mt from the previous estimate following rain in key cropping regions. NSW, Queensland and WA are expected to see the biggest increases, offsetting declines in South Australia and Victoria.
FOB values in Australia: Sept. 2024 APW, WA was valued at $250.00/mt (unchanged from last week).

Argentine Wheat:

According to the Rosario Grains Exchange, recent rains in Argentina’s agricultural heartland were not enough to lift the wheat crop, which has withered on lack of precipitation.
There has been little change to the dry forecast as the wheat crop moves into the key month of September.
FOB Argentine wheat (11.5 percent pro): New crop upriver (Jan.) was quoted around $246 (up $6/mt from last week).

EU Wheat:

EU cash markets were firmer with the board gains and weak Euro helping to propel Matif to a €10 gain for the week.
The EU Commission took down soft wheat production to 116.1 million mt from 120.8 million mt last month. With durum at 6.9 million mt, this puts the all-wheat crop at 123 million mt (compared to the USDA’s 128 million mt). Old crop 2023/24 stocks were reduced 1 million mt on an increase in exports to 36 million mt, but last year’s exports are 3.6 million mt above customs data. The EU Commission revised its export number of 26.7 million mt (a 26 percent drop YoY) and is now over 7 million mt below the USDA’s 34 million mt.
The EU Commission’s revised export number of 26.7 million mt is now over 7 million mt below the USDA’s 34 million mt.
Quality data from FranceAgriMer indicated that only 26 percent of the French wheat crop met test weight standards of 76 kg/hl after rains impacted crop production and quality.
EU FOB prices: 2024 French 11 pro wheat closed at $243.00/mt (up $18/mt from last week); Sept. 2024 German 12.5 pro wheat closed at $247.00 (up $14/mt from last week); Sept ‘24 Baltic 12.5 pro wheat closed at $240.00/mt (Up $11/mt from last week).

Black Sea Wheat:

Cash markets were firmer with Constanza bidding €193/mt spot, but Russian wheat was unchanged with 12.5 pro offered at $217 for Oct.
In Russia, local analysts are starting to waver on their production forecast with Russian ideas likely going lower from currently ~83 million mt. The export tax continues to creep higher and moves back to over $12/mt as of tomorrow.
Turkish wheat imports total near 600k mt since the start of the new season with the trade closely monitoring any signs of Turkey ending or extending their wheat import ban.
We have Russian FOB values for 12.5 percent protein wheat for Sept. 2024 at $216.00/mt (down $2/mt from last week).

Significant purchases/ trades:

There were no major purchases/ tenders.

Thailand bought 120kt feed wheat at $259.95/mt c&f Liner Out for October shipment.
Algeria’s line up totals around 900k mt (earlier sales), all of which was Black Sea product apart from one vessel of durum from Mexico.
S. export sales of 532k mt were within expectations, and the season total of 366 million bu remains 33 percent above last year’s, against the USDA’s projected 17 percent increase.

Significant events over the past week:

According to the latest ABARES estimate, Australia is expected to produce 31.8 million mt of wheat, up by 2.7 million mt from the previous estimate following rain in key cropping regions.
Statistics Canada used an average yield of 50.3 bu/ac for spring wheat (compared to 48.9 last yr.) and put Canadian spring wheat production at 25.3 million mt (just 170k mt below last year’s).
- The pre-report estimate by the trade was at a significantly bigger 26.6 million mt
- We will be watching the provincial assessments next to balance them with the StatsCan numbers. Incidentally, AB Ag reported 17 percent of their spring wheat harvested and assessed an average yield of 46.3 bu/ acre, which was down from earlier estimates.
Statistics Canada pegged Canadian durum production at 6 million mt based on yields of 35.8 bu/acre. This production number would exceed last year’s (adjusted production number) by 47.3 percent.
- The pre-report estimate by the trade was at 6.3 million mt. – Having said this, we hear that durum in the south is not yielding well, and the final verdict on yields and on quality (especially with light grain) is still out there.
In the U.S., the first northern durum samples are grading a U.S. No. 2 Hard Amber Durum.
The wheat complex was up across all three exchanges on Friday.
Season total of U.S. wheat sales at 366 million bu are 33 percent ahead of last year’s, against the USDA’s projected 17 percent increase.
EU cash markets were firmer with the board gains and weak Euro helping to propel Matif to a €10 gain for the week.

Mercantile’s Weekly Outlook:

According to Mercantile, the market went into the long weekend buoyed by the week’s gains. However, Mercantile will watch if Black Sea values follow suit. Spot markets may have printed seasonal lows, but few are willing to pay the record carries. Mercantile expects futures to stabilize or maybe get stronger, as the weather forecast is not great. The carrying charges in the markets encourage growers to use their storage to the maximum.

Canadian Primary Elevator Bids, in Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Sept. 3, 2024

Grade Spreads, in Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Sept. 3, 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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