Wheat Market Outlook and Prices
The Wheat Market Outlook is provided by Mercantile Consulting Venture Inc.
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- World Wheat Overview:
- Wheat Market Outlook
- Primary Elevator Bids
- Grade Spreads in Canadian Dollars
- Relevant FOB Prices and Calculated Basis
Weather concerns about several wheat production areas are increasingly creeping into the discussions about wheat markets and their outlook.
- The two pie charts today help put the relative importance of various producing countries with respect to overall production and exports into focus. In terms of production, The EU and FSU represent the single largest production areas, followed by South Asia and East Asia.
- In terms of export market share, Russia has become the single biggest exporter this crop year, followed by the EU and the USA. At 11% of total world exports, Canada ranks 4th, followed very closely by Australia, the Ukraine and then Argentina. Current potential weather problems in the US, Argentina, Australia and some parts of the EU could potentially affect a significant amount of wheat production.
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 this week’s market events in the major wheat origins.
- Futures: CBOT and KC wheat hit contract lows before rallying into the weekend. MPLS lost 12c during the week in spite of a 6c gain on Friday.
- Funds: Speculative Funds actually extended their net short last week.
- Matif: Matif futures in Europe hit contract lows before ending the week slightly higher.
- Given the CGC handling data for week 17, Canadian wheat had another good export week week, with 351,600 mt loaded for export, and 78,100 mt of wheat used domestically. 197k mt of the export wheat were loaded on the Pacific Coast, 95,700 mt in St. Lawrence elevators.
- 197k of the wheat loaded was No. 2 spring wheat (61.5%), 61k mt were No. 1 quality wheat.
- In relevant trade, Iraq bought 100,000 mt of US and Australian hard wheat. Iraq paid US$294.50 for US wheat. – Canada did offer, but their price of US$303.50/mt was too high and presents a huge premium to elevator bids. Taiwan purchased 81,780 mt of US wheat on Friday for Jan/Feb.’18 shipment. Japan bought 151,853 mt of quality wheat on Friday from Australia, Canada, and the US. Of that total, 57,430 mt were bought from the US. We think Canada sold one cargo.
- In grain shipping week 17, Canadian producers delivered 107k mt of durum into the handling system while Canadian Durum exports amounted to a decent 115.4k mt and 1.3 mln mt year-to-date. This is now 11% ahead of last year’s year to date exports of 1.2 mln mt.
- The USDA Export Inspections reports this week showed wheat shipments for the week of Nov. 23 at 344,721 mt, 32.4% bigger than last week and 40.5% above the same week last year.
- next year’s crop, 92% of the US winter wheat crop was emerged as of Nov. 26, about average. But the crop rating was put at 50% Gd/Ex, down 2% from last week. This is the lowest rating for the end of Nov. in five years and is behind the five-year average of 54%.
- The USDA baseline numbers brought minor support to wheat, projecting further declines in US wheat acreage for 2018/19 along with a small decline in end stocks: all wheat 2018 acreage down to 45 mln acres and 38.34 bu yields (46 mln ac, 46.3 bu yield in ’17).
- An anticipated serious storm over eastern Australia is causing concerns about Australian wheat as the heavy rains could threaten un-harvested wheat crops. Heavy precipitation of 12+ inches is forecast for Victoria and NSW. Roughly 50% of the wheat crop in South Australia has already been harvested, but only ~30% in Victoria and NSW. The wheat crop remaining to be harvested could be as much as 1.8 mln mt in Victoria and 1.9 mln mt in NSW/ South Australia. The excessive rains are most likely to result in quality losses vs. outright tonnage losses.
- Bage (Buenos Aires Grain Exchange in Argentina) pegged the Argentine wheat harvest at 26% complete. Their wheat crop estimate stayed at 17 mln mt, although some had talked about frost damage this week.
- Argentine FOB wheat values Argentine increased by US$2-3/mt ahead of the Algerian wheat tender, and Argentina was reported to have sold up 3-6 cargoes on this tender. The price was ~US$172-174/mt FOB Argentina.
- Fob values of wheat in the EU were little changed this week.
- French wheat remains uncompetitive, except to African destinations.
Black Sea wheat:
- Russian prices for 12.5% protein wheat dropped to US$188/mt by the end of the week against offers at US$192/mt. Deferred Feb-March wheat was offered at US$190-193/mt. the discount for 11.5% protein wheat stayed at at US$8-9/mt.
- In Russia, agency SovEcon, reported that the Russia’s 2018 grain harvest next year could amount to 128.2 mln mt after this year’s record of 134 mln mt. This is based on its expectation that the coming winter will be relatively favorable for winter grains and that 6 percent of sowings will be lost. The forecast includes 76.7 mln mt of wheat in 2018 compared with 83.9 mln mt this year.
- Per Reuters, India’s production of wheat and pulses is expected to jump in 2018 as a hike in the government’s assured purchase prices (MSP’s) and ample rainfall have prompted farmers to plant more of the winter crops. This may allow India to avoid buying overseas wheat for the first time in three years.
Significant purchases/ trades:
- spring wheat, Japan bought 151,853 mt of quality wheat on Friday from Australia, Canada, and the US. Of that total, 57,430 mt were bought from the US. We think Canada sold one cargo.
- Algeria bought 570k mt at US$208.75-210.50/mt of French & Argentine wheat.
- Iraq bought 50k mt of Australian wheat at US$283.35/mt and 50k mt US wheat at US$294.50/mt.
- Egypt (GASC) bought 120kt m of Russian wheat at US$207.50/mt.
- Saudi Arabia tendered on Friday for 480k mt wheat for Feb-Apr delivery.
- Thailand tendered for 100k mt feed wheat for Dec-Jan.’18 delivery; there are no results yet.
- Heavy rains in Australia were seen to be negatively affecting production, and yields in Argentina were less than forecast.
- Canada did offer wheat to Irag, but the price of $303.50 was too high and did not trade. The price represents a huge premium to elevator bids.
- La Nina could present a risk to Southern Hemisphere crops.
The concerns in the markets are the heavy rains in Australia reducing yields and quality, and the lower than expected yields in Argentina. Thus quality continues to be an issue and good premiums can be made for better qualities of wheat as was seen from the Iraq results.
We get the final StatsCan production numbers next week. We expect StatsCan will give larger supplies in Canada, but this is not really bearish as logistics tell us that this just means larger carryovers.
Russian/FSU crops continue to be cheap and will do the Middle-East business.
Kansas has gained on Chicago and Minneapolis has weakened compared to Kansas.
We expect to see Russian traders buying in some of their Chicago short hedges, which should improve wheat futures values a little.
Due to a temporary issue, we are unable to include the tables for Primary Elevator Bids, Grade Spreads and FOB and Basis Prices on the web page. Please open the PDF file below for this information.
Primary elevator bids data source: PDQ
|CLICK HERE for the full report in PDF.|
For the archived wheat market outlook and price reports, please CLICK HERE.
Wheat Market Outlook and Prices
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