U.S. 2017 Wheat Plantings at 46-Year Low?
After a strong week last week, when wheat managed to push above its recent trading range high, this week saw wheat continue the run-up to the lows of last summer’s trading range, then spend the rest of the week basically moving sideways.
Kansas City and Minneapolis both resumed their strength against the Chicago market following a correction in those spreads. Protein premiums around the country are improving, adding more support to those quality markets.
Persistent rains on mature wheat in southern Brazil has prompted crop watchers to write off 10% of that crop so far, and take quality down as well. This will likely force Brazil to import more milling wheat from Argentina, removing those stocks from the broader world market.
U.S. exports continue on a strong pace, with 513 TMT sold last week. Hard red winter and spring wheat are still the best performers. Year-to-date sales for all wheat are running 23% ahead of last year and are on pace to meet USDA’s projections, factoring in the 25 million-bushel bump in projections this month.
Corn and soybeans sales are running well ahead of last year as well, with corn up 89% and soybeans up 26%.
Egypt was back in the market this week: After buying 180,000 mt Russian/Romanian wheat last week, they bought another 120,000 mt from Russia this week. Price was about $1.50/MT higher than last week, reflecting world values that have slowly crept higher.
Informa released its wheat planting estimates this week, and projected that winter wheat seedings would be down 1.1 million acres from last year at 35.4 million acres. All wheat plantings were estimated at 48.925 million, down 2.1 million acres from last year.
Low prices are the main reason farmers continue to move away from wheat, but dry conditions in the western Plains certainly aren’t helping. If these planting estimates are accurate, it would be the lowest winter wheat plantings since 1913, and lowest of all wheat plantings since 1970.
Dry conditions in the western Plains haven’t done much to spark bullish enthusiasm in the wheat market, and likely won’t, considering the many years of dry falls that turn out to be good crops.
The same story goes for the Black Sea region, which saw very dry planting conditions the last two falls only to see ample rains the following spring. This year turned out to be record production in Russia. So, dry soils in the fall make producers nervous, but the market has grown immune to that issue.
It is worth noting that both of those major producing regions are slated for much-needed moisture over the next couple of weeks.
Our attention will focus more on Argentina and Australia as the Northern Hemisphere’s planting season winds down and the Southern Hemisphere’s harvest kicks in. We expect to see about average production and good quality from Argentina, and Australia will have near-record production. However, quality is thought to have declined over the last couple of weeks on too much rain in southeast Australia.
Argentina will likely provide a small amount of good milling wheat, yet most of their exports will go directly to Brazil, leaving the world with still a rather large void of higher quality stocks. We normally don’t see a lot of high-protein wheat exported out of Australia, as the little they produce is usually consumed domestically.
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