The Demand for Spring Wheat is Improving

Although spring wheat costs may be struggling to maintain its strength, demand for the commodity has been getting stronger.

March Minneapolis futures are trading around $5.30 per bushel, so that puts prices like two weeks ago when they were $4.75-$5.05, said Erica Olson, NDWC’s Market Development and Research Manager. Olson noted that this month of the year is pretty quiet, and there’s not a lot going on to move the market. 

A big concern that shocked the market has been the coronavirus. It caused uneasiness, and it has depressed a lot of markets, including commodities. There is another factor that’s concerning wheat production. It is some dryness over in Russia. Interestingly enough, Russia forecasted the rise of output next year, despite the drought.

Exports out of Russia are down about 30 percent compared to last year. Also, there have been some random talks about limiting exports from the country.

That probably says that some concerns are going on there. Additionally, Ukraine’s wheat exports are performing the opposite and are up about 35 %. So, in general, from that Black Sea region, exports are relatively stable, Olson said.

Analysts are concerned about the Decline in Production

Also, Europe has seen a stable export demand recently. However, Olson explained there were some wet conditions last fall at planting, which did reduce acreage. The areas are dry as well, so they’re likely looking at lower production this year. 

Looking at the US hard red winter wheat region, the production of the wheat will be the second-lowest in history. That province also has been a bit drier than average.

There are several things out there that could have some market impact if they continue. Recently, USDA released its February World Agricultural Supply and Demand Estimate (WASDE) report. For wheat, USDA expanded its export estimate and decreased stocks.

USDA is now planning total wheat exports at one bln bushels, which is up 25 mln bushels (MB) from the last assess. Current sales for all wheat full amount just over 800 MB, which is a 22 % increase. Olsen says that the demand is excellent, and because of that, stocks dropped 25 mln bushels down to 940 mln bushels, and that would be the minimum level in 5 years.

USDA raised exports by 15 MB For hard red spring wheat. It brought the new estimate to 275 MB and ended with dropped stocks by the same amount – 15 mln bushels – down to 249 mln bushels.

Olson noted that spring wheat planting is going to be unknown, both in the US and in Canada.

Olsen says that there’s a lot of uncertainty this year, just given the late harvest last year, the wet conditions, and then some regions getting a lot of snow. Of course, it relies on what the spring weather is going to bring.

Many analysts are already projecting a decline in spring wheat acres. So that’s something that the market will eventually start to get concerned about, she concluded.