The Prairie Star: Montana Ag Newspaper

As April came to an end and most producers were not close to getting in the field to start planting, spring wheat prices began to rise slightly.

“We've seen some appreciation in the market as we get to end of April,” said Jim Peterson, marketing director for the North Dakota Wheat Commission, on April 30. “The market is trying to reach a balance between the bearish old crop situation which is fighting with an increasingly bullish new crop situation.”

Peterson explained that the market is well aware of available stocks from around the world from the '08 crop and that the U.S. supply situation is “more than plentiful.”

“There really are no buyer concerns like there was last year,” he said.

“But for the '09 crop, which will be harvested in the first part of June for winter wheat, and spring wheat just being planted, supplies look to take a downturn from '08, and in some countries it could be quite significant.

“Buyers don't see major concerns for supplies right now, but 3 to 6 months down the road, supplies look to be tightening,” he added.

Weather is one factor playing into that scenario, causing extremely late planting of the U.S. hard red spring wheat crop. As of April 26, just 15 percent of the nation's hard red spring wheat crop was planted. Typically there is about 33 percent of the crop planted by that time. North Dakota only had one percent of its spring wheat crop planted, while Minnesota stood at 13 percent, Montana at 24 percent and South Dakota at 35 percent.

“With the weather we've seen in late April that will probably push us out even further (for planting),” Peterson said. “We had hoped to make significant progress by the end of April and beginning of May, but now it's looking like May 5 to 15 will be when lots of crop gets planted, barring any more weather delays.

“All through April we knew delayed plantings were a real concern, but now the rubber is hitting the road and it's a reality that we may lose spring wheat acres because it will get too late,” he said. “We're starting to see the market get more concerned as Canada also has a slow start to planting.”

New crop prices for delivery in August/September are starting to get to to that $6 level with new crop bids ranging from $5.75 to $6.11.

“The '09 crop may not be as big and the market is starting to price for that,” Peterson said.

Local cash prices for the 2008 crop are ranging from $6.50 to $6.95 with an average of $6.70. That's up 50 cents from mid April lows, according to Peterson. Nationally the price is at $6.76.

“Back in early January we hit $7, so we're not quite as high, but the market is showing concern,” he said.

Another item of concern is the condition of the U.S. hard red winter wheat crop. Oklahoma and Texas had some drought early on in winter and then was hit with frost in April. As the crop has progressed along they've seen more damage with Oklahoma now reporting 64 percent of its crop in poor to very poor condition while Texas reports 75 percent of its crop in poor to very poor condition.

“There is a lot of crop in those states that won't be harvested,” Peterson noted.

The central and northern winter wheat belt - Kansas, Nebraska, South Dakota and Colorado - has been picking up more moisture lately and it hasn't been too hot, so the winter wheat crop looks better there.

Peterson said the market is trying to weigh what was lost in Texas and Oklahoma against the better looking crops in Kansas, Nebraska and South Dakota.

“There's still a lot of good crop out there, so it hasn't been a huge market factor, but it has added uncertainty to the '09 crop situation,” he said.

On the demand side, Peterson said the recent H1N1 virus has added a little volatility to all commodities.

There may be less consumption of pork in some countries so there's the potential for less soybean consumption, and if travel is restricted that also has an indirect impact on the outlook for commerce and trade.

“Wheat has avoided any major impact, but if it worsens we could see lower overall commodity prices,” he said.

On the export side, there has been some improvement in sales to Asia, with the Philippines and Thailand in the market for 5 million bushels.

Overall, U.S. spring wheat exports stand at 203 million bushels as of April 15. USDA's projection was 205 million this year so there's good potential we could exceed USDA's current projection. USDA had been as high as 250 million with its estimate earlier in the marketing year.

All wheat export sales now total 953 million bushels. USDA is projecting 980 million so there is a good chance of at least meeting, if not exceeding, that goal which will help tighten up the old crop situation.

From a demand standpoint, Canada is still pricing pretty aggressively and the Black Sea region still has wheat to move, so it won't be immediate clear sailing, but it is an improvement, according to Peterson.

Canada also surprised the market with its April 24 planting intentions report, Peterson said.

“A lot of the trade expected an increase in canola acres and less in wheat, but the surprise was that Canada indicated a 5.5 percent increase in spring wheat plantings from 16.4 million acres to 17.3 million this year,” Peterson said. “Canola (acreage) was down over a million and barley was up slightly. It's probably a little negative for us that Canada is up. We had anticipated Canada would cut back on spring wheat acres. However, they have late planting too, so that could change.”

USDA will release its first look at the overall world wheat crop for 2009 on May 12. Right now, the anticipation is for a smaller world crop, but with lower consumption there may not be a significant draw down in available supplies.