Spring wheat prices slide as harvest begins

Since early July, spring wheat prices have seen a slow march downward, and with harvest just getting started at the end of the month, that pressure is likely to continue.

As of July 29, Minneapolis futures were trading at $5.81, which is down more than 50 cents from early July. And in North Dakota, producers have seen some cash prices sneak below the $5 mark with most bids in the $4.95 to $5.25 range.

“And that’s not a real welcome site as harvest approaches,” said Erica Olson, market development and research manager for the North Dakota Wheat Commission. “The reason for some of that price pressure is the harvest in the winter wheat area, and now we’re starting harvest up here and that, combined with just plentiful world production, has brought those prices down.”

Looking at the spring wheat crop, Olson noted that USDA’s latest projection for U.S. production is 504 million bushels (MB), which is about 7 percent lower than last year, but still a decent size crop. That decline, she added, is due to lower acreage and slightly lower yield estimates.

Spring wheat harvest has officially started with most of that taking place in South Dakota where harvest is about 10 percent complete. As of July 29, North Dakota was a couple weeks away before harvest would be in full swing.

In late July, the Wheat Quality Council (WQC) conducted its annual wheat tour with the bulk of the tour taking place mostly in North Dakota. The results were a bit surprising in that the yield estimate actually came in lower than expected.

“(The WQC) came up with a 49 bushel per acre yield. That’s about 5 bushels per acre lower than what they found last year, and quite a bit lower than the current USDA estimate of 59,” she said. “That brings up the question: will the yields be as high as expected? We could end up with a smaller crop, but we won’t know until we get into harvest. Really, for the most part, at least in North Dakota, the crop looks pretty good. There are some spotty disease reports out there, but nothing widespread.”

One thing Olson has noticed is that the crop condition ratings for spring wheat have been dropping the past few weeks. In the July 28 Crop Progress Report from USDA, just under half of the crop is now rated in good/excellent condition.

“A lot of that is just due to the areas that have been drier that is stressing the crop, and then, of course, there has been some weather damage, including strong winds, hail, excessive rains,” she said.

Across the region, the condition of the crop varies quite a bit, especially from east to west.

“The Montana crop is struggling. Only 6 percent of it is rated in good/excellent condition,” he said. “On the other hand, in Minnesota 90 percent of the crop is rated good/excellent, so there’s a pretty wide range. Those readings definitely show our crop is not without challenges.”

Looking at the U.S. winter wheat crop, producers had some challenges at the beginning of harvest, but it’s been moving along pretty good lately, and as of July 28, about 80 percent of the crop had been harvested, which is near average. Most of what is left is in the northern states of South Dakota, Nebraska, and Montana.

The Canadian spring wheat crop, which is also very important this time of year, has also been struggling with spotty dry areas.

“They did get some moisture recently, but probably not enough to completely remedy that issue,” she said. “They’re forecasting production to be slightly lower than last year by barely a percent, so nothing major. They’re also looking at yields slightly lower than last year.”

Olson noted it will be important to watch that crop to see what the production turns out to be.

One bright spot in the market is that the U.S. has been seeing some pretty good export demand the past few weeks. In the most recent export sales report in late July, the U.S. had over 26 MB in sales with hard red spring wheat accounting for about a third of those sales. Top customers included the Philippines, Taiwan, Indonesia, Chile and Haiti.

Total U.S. wheat sales to date were up 12 percent this year, and a big chunk of that recovery is in the hard red winter wheat class, which has had a couple of tough export years, according to Olson.

“Hard red spring wheat sales are actually down 7 percent, (that’s) not major, but hopefully we start to see that turn around,” she said.

On a global basis, Olson said the market views world production right now as not concerning.

“For example, in Europe, a rebound in production is expected there after a tough year last year. There are still a few areas that are dry, but that’s not overly concerning at all,” she said. “We know that Russia’s crop will likely be below average and their early harvest results are showing fairly poor yields, but that’s already accounted for in the market.”

Lastly, there have been some concerns popping up about dry conditions in Australia. And again, most analysts were already projecting a lower crop in Australia, so any concerns that are out there have already been dealt into the market. It’s more to just watch and see how drastic any of those might become. Otherwise, there are really no big concerns regarding supplies,” she concluded.