Wheat Market Outlook and Prices

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


Wheat Market Outlook – September 9, 2024

Agricultural Market Information System view of the 2024/25 Global Wheat Balance Sheet

September 2024

Data shown in the second rows refer to world aggregates without China. Source: AMIS

  • Wheat production in 2024 is now set to exceed last year’s level by 0.4 per cent following upward revisions for Argentina, China and, especially, the U.S.
  • Wheat utilization in 2024/2025 lowered, largely due to official historical revisions in China, now standing 0.6 per cent below the 2023/2024 level.
  • Trade in 2024/2025 (July/June) is still set to decrease below 2023/2024 despite an upward revision reflecting stronger anticipated demand from the EU, and larger shipments from Kazakhstan and the U.S.
  • Ending stocks (ending in 2025) lifted on larger inventories in China stemming from historical revisions, and in the U.S. due to a larger expected harvest.

Current Global Wheat Condition Assessment

(AMIS, Sept. 6, 2024)

  • In the EU, harvest is wrapping up with poor yields in Belgium, France, and Italy, conversely with exceptional conditions in Bulgaria, Romania, and Spain.
  • In the UK, harvest is wrapping up with below-average yields.
  • In Türkiye, harvesting is wrapping up under favourable conditions.
  • In Ukraine, harvesting is concluding with exceptional yields in the western regions and poor yields in the eastern and southern regions due to dry weather and the ongoing war.
  • In the Russian Federation, winter wheat harvest is nearing completion with reduced yields due to a frost event in May followed by hot and dry weather in June. Spring wheat harvest is beginning under favourable conditions.
  • In China, spring wheat is being harvested.
  • In the S., harvesting of winter wheat wraps up and progresses for spring wheat with above-average yields.
  • In Canada, spring wheat harvesting is ongoing under variable conditions due to prolonged hot and dry weather in the western Prairies.
  • In Australia, conditions are exceptional in New South Wales, Queensland, and Western Australia; however, dry conditions remain in parts of South Australia and Victoria.
  • In Argentina, conditions are mixed due to a lack of soil moisture and low temperatures in the central and northern regions, delaying crop growth.


FOB Cash Values

Source: Mercantile

  • Other than for Australian wheat FOB values again increased last week, especially for HRS.

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:

  • 2022 contract Chicago winter wheat closed at 567, down 7-6 cents on Friday, up 16-2 cents on the week.
  • 2022 contract Kansas hard red winter wheat closed at 577-4, down 11-2 cents in Friday’s trade, up 12 cents on the week.
  • 2022 Minneapolis hard red spring wheat closed at 613-6, down 12 cents on Friday, up 14-2 cents on the week.
  • In S. futures, wheat is currently mixed, with CBOT and KC up, while Mpls is down 5 c/bu.

Canadian Wheat

  • Harvest progress: SK Ag is calling the crop 28 per cent harvested, and assessed a 45 bu avg yield against the crop. This is 1.1 bu/acre lower than StatsCan assessed for SK. The AB spring wheat crop is 36 per cent harvested, and the AB Ag yield is a big 5.2 bu/acre lower than StatsCan’s for AB. In other words, the final production figures are far from confirmed and could be substantially lower than StatsCan’s. The current provincial yields suggest production to be 1.2 million mt lower than the StatsCan yields would suggest (25.4 million mt).
  • The HRS harvest in the U.S. is over 80 per cent complete with good yields but variable quality.
  • StatsCan adjusted their Canadian stocks numbers as of July 31, 2024. Here are the details for wheat:

  • Per StatsCan, wheat excluding durum stocks are down by more than 1 million mt (-21 per cent) from last year’s. And we note that farm stocks are down by huge 1.9 million, while commercial stocks are up by 834k mt.
  • Regarding all wheat stocks, they came in at 4.58 million mt, down 18.5 per cent from last year’s. However, the trade had expected them to come in at an even smaller 4 million mt.
  • Week four Canadian wheat exports at 283k mt were middle of the road, and YTD exports at 1.3 million mt are just ahead of last year’s.

Canadian Durum

  • SK Ag is calling the crop 63 per cent harvested and assessed a 33 bu/acre average yield against the crop. This is 2.3 bu/acre lower than StatsCan estimated for SK a week ago. AB Ag did not update their stats on AB durum. The current SK Ag yield for SK durum would lower durum production by 328k mt.

  • There still is a lot of concern about this year’s Canadian quality, especially light weight durum.
  • The U.S. northern durum is more than 70 per cent harvested and currently grades a U.S. No. 2 Hard Amber Durum.

StatsCan stocks report: Per StatsCan, at 576k mt, Canadian durum stocks are virtually unchanged from last year’s. However, we note that farm stocks are down by 240k mt to just 50k mt, while commercial stocks at 526k mt are up by 242k mt (+85 per cent). [See table previous page.]

Durum exports for week four were a decent 61k mt, for a YTD total of 214k mt, well ahead of last year’s start.

  • Europe: Last month, the EC pegged the EU durum crop at 6.86 million mt, down from ~7 million mt last year. The EC therefore expects imports to increase to 3 million mt (2.5 million last year). Canada will have to compete with Turkish and Russian durum, but the expanded market is welcome and should be constructive.
  • Given current bids, we would wait with additional sales until we have a better handle on Canadian yields and quality.

 U.S. Wheat:

  • The HRS harvest in the U.S. is over 80 per cent complete with good yields but variable quality.
  • Wheat futures showed losses on Friday across the three exchanges but were well up for the week.
  • The USDA Export Sales report indicated just 340k mt of all wheat export sales in the week that ended on Aug. 29. This was on the low-end estimates running 300k mt to 600k mt, and a three-week low.
  • S. HRS for Oct. 2024 is valued at $281.00mt FOB PNW (up $35/mt from last week), FOB Gulf HRW 12/13.5 pro is valued at $275.00/mt (up $9/mt from last week); Gulf HRW 11/12.5 pro is at U.S. $268/mt (unchanged from last week).

Australian Wheat:

  • In Australia, forecasts for next week have NSW and Victoria getting good rains while WA mostly misses out.
  • Australian domestic cash markets were steady, and Jan futures ended the week up around A$9/mt.
  • FOB values in Australia: Oct. 2024 APW, WA was valued at $250.00/mt (unchanged from last week).

Argentine Wheat:

  • BAGE painted an optimistic picture for crop conditions in their weekly update (mostly to better rain accumulations and an anticipation that warmer spring weather will improve slow growth for some regions).
  • BAGE left their production outlook unchanged at 18.1 million mt
  • FOB Argentine wheat (11.5 per cent pro): New crop upriver (Jan.) was quoted around $254 (up $8/mt from last week).

EU Wheat:

  • European markets eased slightly with December Matif back below the €220 watermark at €218.50.
  • Early fall dryness is causing planting concerns that are firstly impacting the earlier planted rapeseed crops and East European farmers are likely to skip rapeseed plantings for later planted wheat in the hope/expectation that soil moisture levels improve later.
  • EU FOB prices: 2024 French 11 pro wheat closed at $246.00/mt (up $3/mt from last week); Oct. 2024 German 12.5 pro wheat closed at $251.00 (up $4/mt from last week); Oct. 2024 Baltic 12.5 pro wheat closed at $244.00/mt (Up $4/mt from last week).

Black Sea Wheat:

  • There is little change in Russian FOB values though CPT prices increased to around RUB16000, and the export tax is likely to increase from next week.
  • Ukraine’s farm ministry has agreed with traders and agriculture associations to limit wheat exports in the 2024/2025 July-June season to 16.2 million mt.
  • We have Russian FOB values for 12.5 per cent protein wheat for Oct. 2024 at $217.00/mt (up $1/mt from last week).

Significant Purchases & Trades

There were no major purchases/tenders.

  • South Korea bought 65k mt November arrival feed wheat at $265.48/mt C&F.
  • Thailand bought 146k mt of feed wheat at $263.95 C&F liner out for Oct.-Nov. shipment.
  • Friday morning’s USDA Export Sales report indicated just 340,032 tonnes of all wheat export sales in the week that ended on Aug. 29, 2024. That was on the low-end estimates running 300,000 to 600,000 tonnes in that week and a three-week low.

Significant Events Over the Past Week

  • StatsCan stocks report this morning: Per StatsCan, wheat excluding durum stocks are down by more than 1 million mt (-21 per cent) from last year’s. And we note that farm stocks are down 1.9 million, while commercial stocks are up by 834k mt.
  • Regarding all wheat stocks, they came in at 4.58 million mt, down 18.5 per cent from last year’s. However, the trade had expected them to come in at an even smaller 4 million mt.
  • At 576k mt, Canadian durum stocks are virtually unchanged from last year’s. However, we note that farm stocks are down by 240k mt to just 50k mt (17 per cent of last year’s), while commercial stocks at 526k mt are up by 242k mt (+85 per cent). The trade had expected overall durum stocks (farm + commercial stocks) at 519k mt, just slightly lower than StatsCan’s.
  • Stagnant spot Russian cash prices and wide futures carries provide a difficult trading environment for 2024, while potentially negative effects of La Nina for Australia and Argentina will feature in early 2025.
  • Early fall dryness is causing planting concerns that are firstly impacting the earlier planted rapeseed crops and East European farmers are likely to skip rapeseed plantings for later planted wheat in the hope that soil moisture levels improve later.
  • Drought conditions seem to be building in the Balkans, Black Sea and U.S. Plains and could become an issue.
  • We will have USDA-WASDE report next Thursday.

Mercantile’s Weekly Outlook

Mercantile does not see a reason for changes, unless they find a big change in the WASDE report. Weather conditions in South America remain poor and Mercantile does not see reasons to be enthusiastic about North American production. Europe is down, while markets have been on the lower end for the last three years. If cash flow is not a problem, Mercantile would use storage and not make further sales.


Canadian Primary Elevator Bids

In Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Sept. 9, 2024

Grade Spreads

In Canadian Dollars per Bu and per MILLION MT

Data source: PDQ, Sept. 9, 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.

PDF Download Wheat Market Outlook - September 9, 2024 September 9, 2024 Report