Although the latest supply and demand report from USDA was considered somewhat bullish for wheat, it didn’t have the kind of impact traders were expecting.
“We did have a slightly bullish USDA report last week so we would have expected to see some market support from that,” commented Erica Olson, marketing specialist for the North Dakota Wheat Commission. “But it was very short lived and we’ve mostly been seeing daily losses the last couple weeks.”
As of Feb. 14 cash prices were trading in a range from $7.45 to $7.75 with average of $7.60 which is about 50 cents lower than just a couple weeks ago.
“The major thing in the USDA report for wheat was that they actually raised feed use by 25 million bushels, and that was higher than expected,” she said. “That was primarily for the soft red winter wheat and hard red winter wheat classes, so it dropped total ending stocks to 691 million bushels.
“That did provide some support for the market right away, but then other factors took over and we saw prices falling again.”
Those factors, she pointed out, included primarily fund selling, pressure from other commodities, and concerns over U.S. budget issues. “Basically just a ton of other outside market factors continue to wreak havoc on the markets.”
Looking specifically at spring wheat, the only change USDA made in its report was to the export projection which was lowered by 5 million bushels down to 230 mb. USDA also lowered export estimates for hard red winter wheat, but raised them for soft red winter wheat and white wheat. The end result was no change for the total all wheat export estimate.
Looking at the world wheat situation, Olson noted that USDA made no noticeable changes to world supply and demand numbers.
In the U.S., Olson said there continues to be a focus on the hard red winter wheat crop. Some of the winter wheat area did receive some rain over the weekend of Feb. 9-10, but overall the entire winter wheat region remains very dry and crop conditions are not faring well so far.
“Some people think the crop will recover and others are already expecting a pretty big drop in winter wheat production this year. It will all depend on the weather in the next couple months,” Olson said.
Another positive for the market was that export sales were much higher than expected at 24 million bushels. The majority of those sales were for hard red winter and soft red winter wheat, however. Total U.S. wheat sales now are at 795 million bushels which is down about 5 percent from last year at this time.
Glancing at the different wheat classes, hard red winter wheat sales are down about 5 percent; hard red spring wheat sales are down about 9 percent; and white wheat sales are down about 19 percent.
On the other hand, soft red winter wheat sales are up quite a bit – about 27 percent, and durum sales are about 6 percent higher.
“Really, in the last few weeks we’ve seen sales pick up,” Olson said. “We were a lot further behind earlier this year, but the market would like to see additional sales before that becomes a big supportive factor.”
The next big market factor will be planting intentions for spring. The International Grains Council has already put out some world estimates for the 2013 crop year and right now they’re expecting harvested acres to be up about 2 percent from last year.
“In fact, they’re forecasting harvested acres to be the highest since 1998,” said Olson, adding that the IGC is showing acreage increases for Europe, the Black Sea Region and South America while also showing a bit of a decline for the U.S. and Canada.
“In Europe so far they’ve had mostly good winter weather conditions, and the Black Sea region has had good conditions too, although there is some concern in Ukraine that frost could cause some damage. Of course we have our concern about our winter wheat crop in the U.S.,” she said.
“For now, production is a big unknown for the winter wheat crop until we get a better handle on yield potential,” she added. “And, specifically to the U.S., what type of abandonment rate we’ll have on the winter wheat crop.”
Of course, spring wheat acres both here and in other Northern Hemisphere countries will be dependent on price and weather conditions.