Although the spring wheat market has fluctuated a little in recent weeks, prices have been able to stabilize somewhat, according to Erica Olson, marketing specialist for the North Dakota Wheat Commission.
“For the last week or so spring wheat has been able to shrug off some of the negative market pressure it’s been dealing with, Olson said. “We’ve seen prices stabilize somewhat, however today (July 21) the market is down again.”
Olson noted that September futures were around $8.40 while cash prices around the region were $8.50 to $9.20.
“A lot of the drop in cash prices is due to the basis deteriorating,” she said. “Part of that is due to transportation issues, but also we’re seeing some harvest pressure from the winter wheat crop.”
The hard red winter wheat harvest in the U.S. is pretty much done in Oklahoma, Texas and Kansas and is now heading into Nebraska and South Dakota. So far, average protein is slightly higher than average at around 13 percent.
“So we’re seeing the domestic market using that in place of lower protein spring wheat in some of their mixes,” Olson said.
Another market issue is the return of Russia to the wheat export market
“That may be a slow process, but we’ve seen Egypt making purchases. However, some buyers may not be as trustworthy of the Russian market because they suddenly pulled out last year and cancelled contracts.”
Also in Russia there are some spring wheat regions that are quite dry so that could possibly affect their supplies in the future.
In USDA’s latest supply and demand report released in mid July, the highlight was the first class by class estimates for 2011. USDA did make a few changes to the total U.S. wheat situation. Beginning stocks for 2011 were raised from 809 million bushels to 861 million which basically coincides with the what the June 1 stocks report indicated, Olson noted.
The agency also raised the overall wheat yield estimate slightly, increasing production to 2.1 billion bushels.
Exports were also raised this month by 100 million bushels up to 1.15 billion. That’s below last year’s level, but the increase in exports also led to lower ending stocks which are now estimated down to 670 million bushels.
Olson said USDA used the June acreage numbers for spring wheat and durum to come up with its latest production estimate. However, that could change as USDA is resurveying producers this month since at the time of the June survey many producers were still trying to get their crops planted.
For hard red spring wheat USDA is estimating production at 504 million bushels which compares to 570 million last year.
“Again, the acreage number being used is from June so that is likely to change,” Olson said.
USDA is projecting an average yield of 41.7 bushels per acre, which is down about 4.5 bushels compared to last year.
Looking at other numbers in the report, domestic use will be down about 10 percent which is likely due to a better hard red winter wheat crop.
Exports are estimated at 270 million bushels “That’s down quite a bit from last year’s high level of 340 million bushels. That’s due to recovering crops around the world and tighter supplies of spring wheat.”
Ending stock levels are expected to drop for the third straight year – down to 173 million bushels.
“Obviously these numbers are all subject to change,” Olson said. “We’ll get updated acreage and production numbers in August.”
The hard red spring wheat crop that did get planted this year is in pretty good condition with about 73 percent rated in good to excellent condition.
“But I think everyone in the back of their minds knows crop development is behind normal. About 60 percent is headed out compared to an average of 90 percent,” Olson said.
“We’re seeing good yield potential in some areas, but the weather needs to cooperate and allow for little disease pressure and, of course, we’re hoping for no early frost this year,” Olson concluded.
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