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USW Publishes Annual Crop Quality Report and Hosts Seminars to Help Customers Make Purchasing and Milling Decisions

As a key part of its commitment to transparency and trade service, U.S. Wheat Associates (USW) produces an annual Crop Quality Report that includes grade, flour and baking data for all six U.S. wheat classes. The report compiles comprehensive data from analysis of hundreds of samples conducted during and after harvest by our partner organizations and laboratories. The report provides essential, objective information to help buyers get the wheat they need at the best value possible.

The 2019 USW Crop Quality Report is now available for download in English, Spanish, French and Italian, and will be available in Chinese and Arabic soon. USW also shares more detailed, regional reports for all six U.S. wheat classes on its website, as well as additional information on its sample and collection methods, solvent retention capacity (SRC) recommendations, standard deviation tables and more. Download these reports and resources from the website here.

USW’s annual Crop Quality Seminars are already underway and will continue over the next month around the world. USW invites its overseas customers, including buyers, millers and processors, to these seminars led by USW staff, U.S. wheat farmers, state wheat commission staff and educational partner organizations. The seminars dive into grade factors, protein levels, flour extraction rates, dough stability, baking loaf volume, noodle color and texture and more for all six U.S. wheat classes and are tailored to focus on the needs and trends in each regional market.

In 2019, USW is projected to host 43 seminars in 41 countries, including official seminars in the South America region for the first time in several years.

Customers have previously shared that they use the report throughout the year as a reference manual and to guide them through purchases and future planning. The seminars allow U.S. and USW experts to interpret the data and how to use it. Customers will often use the seminars and report as educational training for new employees.

The reports and seminars have been a traditional part of USW’s strategy since 1959, growing to become its single largest marketing activity.

Look for updates from the 2019 USW Crop Quality Seminars on Facebook and Twitter.

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Crop Quality Concerns, Minimal Farmer Selling Drive U.S. Spring Wheat Export Prices

By Claire Hutchins, USW Market Analyst

Despite the potential for reduced U.S. hard red spring (HRS) production year-over-year and crop quality concerns on late-harvested HRS, the United States is still well-stocked to meet overseas customer needs throughout marketing year (MY) 2019/20. As domestic sellers and buyers manage their risk in a dynamic market, however, overseas buyers should expect HRS export basis to increase. U.S. Wheat Associates (USW) wants to provide a closer analysis of this rather unique situation.

Unrelenting precipitation in the Northern Plains continued to challenge HRS wheat producers throughout the 2019 harvest season. Excess moisture on unharvested wheat can lead to low falling numbers, reduced test weights, reduced percentage of DHV and increased DON levels. By Sept. 20, only 76 percent of the country’s spring wheat was harvested compared to 96 percent in 2018.

As markets considered potential quality issues on the rest of the harvest, HRS export prices jumped significantly between Sept. 13 and Sept. 20. The average Gulf HRS 14.0 (12% moisture basis) export basis for nearby delivery increased 20 cents/bu from $1.40/bu to $1.60/bu. In the same week, average Pacific Northwest (PNW) HRS 14.0 export basis for nearby delivery jumped 36 percent from $1.05/bu to $1.65/bu. Market uncertainty carried into the week of Sept. 27 when the country’s HRS harvest was only 87 percent complete, well behind the 5-year average of 99 percent. By Sept. 27, the average Gulf HRS 14.0 export basis increased another 30 cents to $1.90/bu and the average PNW HRS 14.0 export basis added 27 percent to $2.10/bu, both driven by crop quality concerns and minimal farmer selling.

Source: U.S. Wheat Associates Price Report, Oct. 4, 2019

In its October World Agricultural Supply and Demand Estimates (WASDE) report, USDA estimated the United States would produce 15.2 million metric tons (MMT) of HRS in 2019. On Oct. 15, USDA reported harvest was 94 percent complete, still well behind the average completion date of around Sept. 30. Many industry sources now believe the HRS harvest is essentially over as farmers struggle to enter their fields due to ongoing precipitation, including heavy snow in parts of North Dakota and Montana. If realized, this would put the total 2019 U.S. HRS harvest closer to 14.3 MMT, 12 percent lower than last year.

As noted, the United States is still well-stocked to meet export throughout MY 2019/20. Industry experts estimate between 60 and 65 percent of this year’s HRS harvest, about 8.94 MMT, is high-quality, milling grade wheat. USDA estimated 2019 HRS beginning stocks at 7.16 MMT. This puts the total supply of U.S. milling wheat in MY 2019/20, including the remainder of last year’s excellent harvest, at 16.1 MMT.

However, customers should be aware that a large portion of these stocks remain in storage as farmers are reluctant to sell wheat at current local prices. HRS export basis levels continue to climb because producers have several incentives to hold their high-quality HRS into the coming months.

First, Minneapolis Grain Exchange (MGEX) forward futures contracts show a significant carry between December 2019 and December 2020. As of the last trade on Oct. 15, the December 2019 MGEX HRS futures contract (MWEZ19) traded at $5.45/bu while the December 2020 MGEX HRS futures contract (MWEZ20) closed at $5.95/bu. Each MGEX HRS futures contract gains about 10 cents per contract period starting in December 2020, a reason for farmers to hold supplies until cash prices increase.

Source: MGEX

Second, average local basis levels are firming across the Northern Plains, which signals to farmers that the discount between futures values and the cash price they receive could shrink over time. For example, according to DTN data, the average HRS local basis value in North Dakota decreased from negative $0.79/bu to negative $0.72/bu between Sept. 30 and Oct. 15. At one elevator in North Dakota, the gap between the December futures price and the local cash price shrank 42 percent from negative $1.05/bu to $0.65/bu. Over the same period, the local average HRS cash price in North Dakota increased from $4.66/bu to $4.74/bu.

Finally, storage space is not under pressure. Typically, HRS moves into the market around harvest and when storage space is needed for row crop harvest, which in 2019 has seriously affected in the Northern Plains. For example, the heavy snow hit North Dakota with only 1 percent of the corn harvest and 16 percent of the soybean harvest completed. With no other crops coming out, farms and country elevators do not yet need to move much HRS wheat out of storage.

Given this situation, USW believes HRS export basis will continue to rise until local cash prices increase enough to encourage producers to liquidate their HRS stocks into the milling and export channels. The United States has plenty of high-quality HRS available to sell into MY 2019/20, but it will take a significant shift in local cash price dynamics across the Northern Plains for these supplies to reach export terminals.

 

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The 2019 Soft White Crop Shines Again

Pacific Northwest (PNW) farmers produced another fine soft white wheat (SW) and white club (WC) crop with good test weight and very acceptable finished product characteristics for 2019. Adequate soil moisture at planting and throughout the growing season did contribute to higher moisture and protein content compared to 2018 but protein remained lower than the 5-year average. In fact, the higher SW protein segment provides opportunities in blends for crackers, Asian noodles, steamed breads, flat breads, and pan breads. Variations in performance data for 2019 compared to 2018 and the 5-year averages are included below for this 6.09 million metric ton (MMT) crop, including 170,000 MT of WC.

That is a summary of results from the U.S. Wheat Associates (USW) 2019 SW and WC crop quality analysis to be posted soon at https://www.uswheat.org/market-and-crop-information/crop-quality/. To complete the analysis, the Wheat Marketing Center (WMC) received and tested SW and WC samples from Idaho, Oregon, and Washington. The Federal Grain Inspection Service (FGIS) graded and ran wheat protein on each sample. WMC conducted wheat, flour, Solvent Retention Capacity (SRC), dough, and finished product tests on composites based on production zones and protein levels. Funding for the annual survey come from state wheat commission USW members and the USDA Foreign Agricultural Service.

As always, buyers are encouraged to review their quality specifications to ensure that their purchases meet their expectations.

Wheat and Grade Data: The Overall average grade of the 2019 SW and WC crops is U.S. No. 1. The average SW test weight of 61.6 lb/bu (81.0 kg/hl) is slightly lower than last year’s 61.7 lb/bu (81.1 kg/hl); WC test weight of 60.6 lb/bu (79.7 kg/hl) is slightly higher than 2018’s 60.4 lb/bu (79.5 kg/hl). SW has fewer damaged kernels, fewer shrunken and broken kernels, and less foreign material than the 5-year averages. WC shrunken and broken kernel percentages are lower than last year and the 5-year averages. WC foreign material is higher than last year and 5-year averages. WC dockage is slightly higher than last year and the 5-year averages. Other WC grade factors are similar to past averages. Wheat moisture for both SW and WC is above last year and the 5-year averages.

The Overall SW and WC wheat protein content (12% mb) of 10.0 and 9.8%, respectively, are 0.7 and 0.8 percentage points above the respective 2018 values, but below those of 5-year averages. SW and WC wheat ash contents (14% moisture basis) are similar to last year and the 5-year averages. Thousand kernel weight for SW is above 2018 and the 5-year average levels; WC is lower than last year and higher than the 5-year average. SW kernel diameter is the same as last year, but larger than the 5-year average. WC kernel diameter is smaller than last year, but larger than the 5-year average. Falling number values are 317 sec for SW and 355 sec for WC.

Flour, Dough, and Bake Data: The 2019 Buhler Laboratory Mill flour extraction average for SW and WC at 72.1% and 72.8% respectively are lower than last year and the 5-year averages. Flour protein content (14% mb) is 8.9% for both SW and WC. Flour ash content (14% mb) for both SW and WC are higher than last year but the same as 5-year averages. Amylograph peak viscosity value for SW is 485 BU, slightly lower than last year; WC is 523 BU, much higher than last year. Starch damage value is slightly higher for SW than last year but lower than the 5-year averages. WC starch damage is lower than last year and the 5-year averages.

Solvent retention capacity (SRC) water values for SW and WC are less than last year and 5-year averages. SW lactic acid and sodium carbonate values are similar to last year and the 5-year averages. WC lactic acid values are higher than last year, but same as 5-year average. SW and WC gluten performance index (GPI) values are similar to last year and 5-year averages. SW farinograph peak and stability times are shorter than last year and the 5-year averages. WC peak time is slightly longer than last year and 5-year averages. SW and WC water absorptions are similar to last year, but less than the 5-year averages. The SW and WC alveograph L values are considerably longer than last year and 5-year averages. SW and WC extensograph resistance is larger than last year and the 5-year averages. SW and WC extensibility values are longer than last year and the 5-year averages.

Sponge cake volume for SW at 1104 cc is larger than last year, but smaller than the 5-year average, and the total score is slightly lower than last year and the 5-year averages. The sponge cake volume for WC at 1141 cc is slightly larger than last year, but smaller than the 5-year average, and total score the same as last year and much higher than the 5-year averages. SW and WC cookie diameter values are smaller than last year, but similar to the 5-year averages. SW and WC cookie spread factors are more than last year and the 5-year averages.

Chinese Southern-Type Steamed Bread: In southern-type steamed bread compared to a control flour, the 2019 SW and WC specific volumes are slightly less than last year and the 5-year averages. The SW total score is higher than last year and the 5-year averages; WC is the same as last year, but lower than the 5-year average.

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Good Milling and End-Product Performance is Available in 2019 Hard Red Winter Wheat Supplies

Unexpectedly high yields from the U.S. Plains to the Pacific Northwest (PNW) resulted in lower wheat and flour protein in the 2019 hard red winter (HRW) wheat crop, but the crop exhibits good milling and end-product characteristics. Even though mixing times and tolerances are shorter than the five-year averages, the loaf volumes achieved indicate there is adequate protein quality to make quality bread. This crop meets or exceeds typical HRW contract specifications and should provide high value to the customer. The 2019 HRW crop can be characterized as clean and sound with very good milling properties, but with below average protein content still capable of producing good end products.

That is a summary of the major regional results for HRW from the upcoming U.S. Wheat Associates (USW) 2019 Crop Quality Report. California HRW data is reported separately. Plains Grains, Inc., in cooperation with the USDA/ARS Hard Winter Wheat Quality Lab, Manhattan, Kan., analyzed 494 HRW samples collected from grain elevators in Texas, Oklahoma, Kansas, Colorado, Nebraska, Wyoming, South Dakota, Montana, Washington, Oregon and Idaho. Funding for the annual survey come from USW member state wheat commissions and the USDA Foreign Agricultural Service.

Weather and Harvest: The 2019 HRW planted area represents near historic 100-year lows, continuing the trend of recent years. Despite stagnant planted area, HRW production is estimated at 22.9 MMT (840 mil bu), a 27% increase over 2018. USDA estimates the HRW supply (excluding imports) is the third highest in the last 20 years.

Various climatic conditions challenged this crop. However, moisture remained adequate, or even excessive, in the central and southern production areas and resulted in better than expected yields, lower than average protein, but otherwise good milling and processing characteristics. The U.S. Southern, Central and Northern Plains experienced an unusually wet spring, slowing crop maturity and uniformly delaying the beginning of harvest two weeks or more. At the same time, the PNW and Montana experienced abnormal swings in temperature and severe storms. Despite intense and prolonged moisture during later stages of crop development, disease and insect pressure in most production areas was unusually low.  Once harvest began, it progressed normally in most production areas.

Wheat and Grade Data: The 2019 crop has generally very good kernel characteristics. Overall 93% of Composite, 91% of Gulf-Tributary and 97% of PNW-Tributary samples graded U.S. No. 2 or better. Average test weight of 60.6 lb/bu (79.6 kg/hl) is below 2018 but above the 5-year average. Average dockage (0.5%), total defects (1.3%), foreign material (0.2%) and shrunken and broken (0.8%) are all equal to better than 2018 and the 5-year averages. Average thousand kernel weight of 32.7 g significantly exceeds last year and the 5-year average (both 30.7 g). Kernel characteristics, including test weight, thousand kernel weight and kernel diameter are very good and consistent with favorable growing conditions. However, growing conditions favoring kernel size and test weight are not conducive to accumulating protein, which is below last year and the five-year averages. The average wheat falling number is 378 sec, indicative of sound wheat.

Flour and Baking Data: The Buhler laboratory flour yield average is 74.0%, comparable to the 2018 average of 75.1% and the 5-year average of 75.5%. The 2019 flour ash of 0.48% (14% mb) is comparable to last year’s 0.44% but significantly lower than the 5-year average of 0.55% due to milling adjustments made in 2018. The alveograph W value of 223 10-4 J is significantly lower than last year but comparable to the 5-year average of 234 10-4 J. Farinograph peak and stability times, 3.3 min and 7.3 min, respectively, are significantly lower than last year’s 5.2 min and 12.2 min. Average bake absorption is 62.7%, below the 63.7% value for 2018 but comparable to the 5-year average. Overall loaf volume averaged 863 cc, well below last year’s 901 cc, but comparable to the 5-year average of 851 cc.

Complete 2019 crop quality data for all six U.S. wheat classes will soon be available online and at annual USW Crop Quality Seminars.

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Production Update: USDA Confirms High U.S. Wheat Yields Offset Reduced Planted Area

By Claire Hutchins, USW Market Analyst

On Sept. 30, USDA released its Small Grains Summary noting that 2019/20 U.S. wheat production increased to 53.3 million metric tons (MMT), up 4 percent from last year due to significant improvements in yield despite lower planted area. While this is still 2 percent below the 5-year average of 54.2 MMT, the production volume coupled with significant carry-in stocks ensure that the U.S. wheat remains the most reliable supply for 2019/20. Here is a look at 2019/20 U.S. wheat production by class.

USDA’s Small Grains Summary indicates U.S. wheat yields offset a reduced planted area for 2019/20.

Hard Red Winter (HRW). Last fall, U.S. farmers decreased HRW planting in the U.S. Southern and Central Plans due to extremely wet conditions which delayed the soybean harvest and in turn HRW planting. A slight uptick in planted area in Montana and South Dakota partially offset reductions in other states. Total U.S. HRW planted area fell 2 percent year-over-year to 22.7 million acres (9.19 million hectares), 15 percent below the 5-year average of 26.6 million acres (10.8 million hectares). Cool temperatures and favorable moisture during the growing season boosted HRW yields substantially year-over-year in Kansas, Nebraska and Oklahoma. In Kansas, the largest HRW producing state, a higher average yield offset lower planted area and production increased 22 percent over 2018/19 levels to 338 million bushels (9.17 MMT). USDA estimates total 2019/20 HRW production increased 26 percent over last year to 834 million bushels (22.7 MMT).

Hard Red Spring (HRS). Cold soil temperatures and excessive moisture in certain areas delayed HRS planting across much of the Northern Plains. USDA says U.S. farmers planted 12.0 million acres (4.86 million hectares), 6% below last year but slightly higher than the 5-year average of 11.8 million acres (4.78 million hectares). A cool summer boosted HRS yields in Montana and South Dakota. Heavy, persistent rain has severely delayed the 2019 HRS harvest. According to USDA, as of September 30, U.S. spring wheat harvest is only 90 percent complete compared to the 5-year average of 99 percent. USDA estimates 2019 HRS production will total 558 million bushels (15.2 MMT), 5 percent lower than 2018, but 8 percent higher than the 5-year average of 518 million bushels (14.1 MMT).

Soft Red Winter (SRW). Last fall, U.S. farmers planted 5.54 million acres (2.24 million hectares) of SRW, down 6 percent from the year prior and 18 percent from the 5-year average of 6.7 million acres (2.71 million hectares) due to low wheat prices compared to soybeans and delayed planting. Excessive moisture continued through the growing season and slowed harvest progress in many places. USDA reported SRW production totaled 239 million bushels (6.50 MMT), down 16 percent from last year and 31 percent below the 5-year average of 348 million bushels (9.46 MMT).

White Wheat (Soft White, Club and Hard White). U.S. white wheat planted area fell 4 percent below 2018/19 levels to 3.95 million acres (1.60 million hectares). Mild growing conditions and good soil moisture in the Pacific Northwest (PNW) supported above-average winter and spring wheat yields. The average white winter wheat yield in Oregon increased 1.0 bu/acre (.067 MT/hectare) over last year to 68.0 bu/acre (4.57 MT/hectare) in 2019. Slightly lower planted area and above-average yields kept U.S. white wheat production stable year-over-year at 273 million bushels (7.43 MMT) and 8 percent higher than the 5-year average of 252 million bushels (6.87 MMT).

Durum. Anticipating less-than break even prices, farmers planted less durum area this year. In its Small Grains 2019 Summary, USDA estimated 1.34 million acres (542,000 hectares) were planted to durum, down 35 percent from 2018/19 and 32 percent below the 5-year average of 2.0 million acres (664,000 hectares). USDA estimated total 2019/20 U.S. durum production at 57.3 million bushels (1.57 MMT), down 26 percent from last year. Cool, wet weather boosted yields in the U.S. Northern plains. Both Montana and North Dakota durum yield potential reached a record high in 2019. The country’s average durum yield also reached a record high of 44.8 bu/acre (3.01 MT/hectare), up 13 percent from last year. However, as with HRS, a significant portion of the northern durum crop has not yet been harvested. Desert Durum® production fell 46 percent year-over year to 5.67 million bushels (154,000 MT) due to sharply lower planted area in both Arizona and California.

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Too Much Rain on a Smaller Soft Red Winter Crop

Following planting in the fall of 2018, much of the U.S. soft red winter (SRW) growing area received excessive moisture throughout the winter and spring, which also caused lengthy harvest delays in many areas. The excessive moisture adversely affected quality by reducing falling number values and increasing DON values in some areas. At an estimated 7.01 million metric tons (MMT), this is a smaller crop than in 2018 because farmers seeded less and average yield per harvested acre was below last year and the five-year average. Processors should find good qualities in the 2019 SRW crop for cookies and crackers and segments of the crop showed good cake qualities.

That is a summary of results from the U.S. Wheat Associates (USW) 2019 SRW Crop Quality Report, now posted online at https://bit.ly/SRWCQ0919. To complete the report, Great Plains Analytical Laboratory in Kansas City, Mo., collected and analyzed 261 samples from 18 reporting areas in the 11 states that account for about 72% of total 2019 SRW production. Funding for the annual survey come from state wheat commission USW members and the USDA Foreign Agricultural Service.

As always, buyers are encouraged to review their quality specifications to ensure that their purchases meet their expectations.

Wheat and Grade Data. The overall average grade of the samples collected for the 2019 SRW harvest survey is U.S. No. 2. The average test weight is 58.1 lb/bu (76.5 kg/hl), equal to the 5-year average and above the 57.9 lb/bu (76.2 kg/hl) average in 2018. The Gulf Port average of 58.5 lb/bu (76.9 kg/hl) is above both last year and the 5-year average. The East Coast test weight average of 56.9 lb/bu (75.0 kg/hl) is above last year but below the 5-year average of 57.4 lb/bu (75.6 kg/hl).

The East Coast Total Defects average of 2.5% is above last year and the 5-year average, indicating that damaged and shrunken and broken kernels are slightly higher than usual in that portion of the crop. The Gulf Port Total Defects is 1.1%, above 2018 but almost half of the 5-year average. Other Gulf Port grade factors, dockage and moisture are close to or higher than 2018 and 5-year average values.

The Composite average wheat protein content of 9.5% (12% moisture basis) is lower than 2018’s 9.9% and the 5-year average of 9.7%. Both the Gulf Port protein average of 9.4% and East Coast average of 9.7% are below the respective 2018 and 5-year averages. The Composite average falling number of 288 seconds is significantly lower than 2018 and the 5-year average. The Gulf Port average of 289 seconds and the East Coast average of 283 seconds are both significantly below 2018 and the 5-year averages. Approximately 21% of samples had a falling number below 250 seconds in 2019, with 13% below 225. The Composite DON average of 1.3 ppm is above the 2018 average and close to the 5-year average of 1.2 ppm. The East Coast value of 0.5 ppm is below the 5-year average while the Gulf Port value of 1.5 ppm is above the 5-year average. Of the samples tested for DON, 33% of the Gulf Port results and 84% of the East Coast results were less than 1.0 ppm.

Flour and Baking Data. The Composite, East Coast and Gulf Port Buhler laboratory mill flour extraction averages are below 2018 and the 5-year averages. The farinograph peak and absorption values are similar to 5-year averages, but the stability values are all below the 5-year averages. The SRC values generally indicate good quality for cookies. The Composite, East Coast and Gulf Port alveograph L averages of 81 are lower than last year and the 5-year average, indicating lower extensibility. All other alveograph averages are similar to the respective 5-year averages given the variability of alveograph analysis. The Gulf amylograph average of 392 BU and East average of 462 indicate relatively high levels of amylase activity in the crop and are consistent with the low falling numbers.

The Composite, East Coast and Gulf Port cookie spread ratios are all higher than last year and the 5-year averages, indicating good extensibility. Average loaf volumes are all lower than last year and the 5-year averages.

USW will share complete data for all classes of U.S. wheat in future Wheat Letter posts and with hundreds of overseas customers at several upcoming events, including USW’s annual Crop Quality Seminars, and in its annual Crop Quality Report.

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Drought-Fueled Production Losses in Australia Alter Global Wheat Trade

By Claire Hutchins, USW Market Analyst

Prolonged drought has severely impacted Australia’s wheat production and, as a result, contributed to a significant shift in world wheat trade. If current weather conditions in Australia persist, U.S. Wheat Associates (USW) believes these export trends could continue through marketing year (MY) 2019/20 and beyond.

According to USDA data, in the five years leading up to drought conditions that started in 2017, Australia exported an average of 18.5 million metric tons (MMT) of wheat per year. In MY 2016/17, Australian wheat production reached a record 31.8 MMT and exports reached 22.6 MMT, their highest level since MY 2011/12 (a significant portion of this volume was wheat exported for animal feed). In MY 2017/18, however, reduced supplies led to a sharp fall in Australian wheat exports to 13.8 MMT. In MY 2018/19, exports fell again to 9.0 MMT after Australian wheat production declined to 17.3 MMT.

Australia produces white wheats that compete effectively in regional bread applications, but most significantly in South and North Asian noodle markets. Even though there is no single U.S. wheat class with optimal characteristics for fine Asian noodle products, over many years, USW has provided technical assistance to millers and noodle manufacturers on blending of U.S. wheat or flour to optimize noodle quality and compete with Australian noodle varieties. In addition, U.S. hard red spring (HRS) provides a competitive option for higher protein flour needed in many markets to meet expanding demand for loaf bread products and hamburger buns.

USW believes that key customers have turned to the United States as Australian farmers struggle to produce enough exportable supplies. Between MY 2016/17 and MY 2018/19, for example, Australia lost market share in six of its top ten wheat export markets. Notably, Australian wheat exports to the Philippines, Indonesia, Vietnam and Malaysia declined while U.S. wheat exports to those countries increased in MY 2018/19.

Australian wheat’s share as a percent of total wheat imports in four key export markets has declined over the past two market years. Prolonged drought has significantly reduced exportable Australian supplies.

In MY 2019/20, USDA predicts Australian wheat production will rebound slightly to 21.0 MMT and exports are expected to increase to 12.5 MMT. Current USDA commercial sales data also show U.S. wheat exports to those four countries are ahead of last year’s pace.

U.S. farmers understand all too well the financial strain drought creates for their families and for end users of their wheat. Australian farmers must be concerned about whether their market share will rebound when the drought ends and supplies increase. That too is something U.S. wheat farmers, who have lost virtually all their market share in China under the current trade dispute, can understand. Market conditions change for all competitors. Ideally, that competition will continue to be carried out with the best interest of our shared customers and prospects in mind.

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Unfavorable Weather Delays U.S. Spring Wheat Harvest

By Claire Hutchins, USW Market Analyst

Though early April is the ideal planting window for U. S. hard red spring (HRS) wheat, saturated fields and cold soil temperatures kept many farmers out of their fields until late May or early June this year. The same precipitation and cool temperatures that delayed planting boosted early HRS development through mid-June and helped reduce concerns about late planting from central Montana to western Minnesota. Now, scattered precipitation and high humidity across the Northern Plains are preventing many farmers from entering their fields to begin the spring wheat harvest. According to USDA’s August 19 Crop Progress report, only 16% of the country’s spring wheat harvest was complete compared to last year’s 56% and the 5-year average of 49%. In spite of the delay, USDA rates 70% of U.S. spring wheat in good to excellent condition and an average yield of 49.2 bu/acre (3.30 MT/hectare), up from last year’s 48.3 bu/acre (3.25 MT/hectare). USDA predicts the country will produce 597 million bushels (16.2 million metric tons (MMT)) of HRS in 2019.

USW gathered some additional information from our stakeholders in HRS production states.

Minnesota. “It’s been a good year for wheat. The crop looks great and we expect above average yields and average protein levels despite delays,” says Charlie Vogel, Executive Director of the Minnesota Wheat Research & Promotion Council. Farmers in Minnesota, the second largest HRS-producing state in the country, are expected to harvest 91.7 million bushels (2.5 MMT) of wheat in 2019, down slightly from 2018 levels as reduced planted area offset increased expected yields. According to Vogel, Minnesota farmers have barely begun the spring wheat harvest due to scattered precipitation throughout the state. In an average year, farmers would be about 88% complete by now compared to the 14% reported by USDA. In the west, farmers are swathing their wheat in windrows to dry it out before combining. With a cool, dry weather forecast for the next 10 days, Vogel expects Minnesota’s harvest to progress nearly to completion by next week if dry conditions hold.

In Montana, the third largest HRS-producing state in the country, cold and wet soil conditions widened the spring planting window from mid-April to early June. A dry July helped farmers who were able to get their HRS in the ground early, but could hurt yields for late-planted HRS. The Montana spring wheat harvest has been “slow and frustrating” according to Cassidy Marn, Marketing Program Manager at the Montana Wheat & Barley Committee, as rainy, cold weather poured over the southern two thirds of the state around August 10. Marn believes these conditions have delayed the HRS harvest by about 3 days on average and by as much as two to three weeks in some places. Montana’s spring wheat harvest, at 20% complete, is far behind last year’s pace of 42% and the five-year average of 44%. When Montana’s farmers do complete harvest, they are expected to see an average 34.0 bu/acre (2.28 MT/hectare) in 2019, 2.0 bu/acre higher than last year’s yield, according to USDA. Montana’s HRS crop is expected to total 85.0 million bushels (2.31 MMT) this year, down 11% from last year as reduced planted area more than offsets increased expected yields.

North Dakota. “Spring wheat harvest had a sluggish start, but is beginning to accelerate. It is an above-average crop and we are waiting to see how rains impact harvest pace,” says Jim Peterson, Policy and Marketing Director at the North Dakota Wheat Commission. North Dakota is the largest HRS-producing state in the country and is expected to produce 320 million bushels (8.70 MMT) in 2019. Cool, wet weather delayed spring wheat planting but boosted yield potential in the central and southern part of the state. In north-central North Dakota, HRS yields could be lower than USDA’s predicted 50.0 bu/acre (1.36 MT/hectare) due to unusually dry conditions that affected the crop throughout the summer. As of August 18, only 12% of the state’s HRS was harvested compared to 55% last year and the 5-year average of 43%. Peterson predicts the state’s HRS harvest could take off in the next couple of days if a pocket of cool, dry weather rolls through the state.

South Dakota. According to Reid Christopherson, Executive Director of the South Dakota Wheat Commission, “HRS harvest is extremely delayed. Unfortunately, the crop is ready to harvest; however, moisture and mud in the fields have stalled progress. Extreme humidity and frequent rains have allowed only a few hours of harvest per day when field conditions permit access.” Only 27% of the state’s HRS harvest is complete compared to last year’s 89% and the 5-year average of 75%. Based on early harvest data, South Dakota HRS test weights and protein levels look good, but continued moisture throughout the harvest could reduce kernel color. USDA expects South Dakota HRS yields to increase 12% over last year to 42.0 bu/acre (2.82 MT/hectare), but production is expected to fall 10% year-over-year as reduced planted area offsets increased expected yields.

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Reduced Wheat Production Estimates Boost Russian Export Prices

By Claire Hutchins, USW Market Analyst

Extremely high temperatures and below-average precipitation levels prompted USDA to reduce its Russian wheat production forecast from 78.0 million metric tons (MMT) in its June World Agricultural Supply and Demand Estimates (WASDE) report to 74.2 MMT in its July WASDE report. That is a 5% reduction month over month. Russia’s leading agriculture consultancies also reduced their Russian wheat production forecasts. Between June 11 and July 24, SovEcon reduced its 2019/20 Russian wheat production forecast by 10% from 82.2 MMT to 73.7 MMT. Between early June 12 and August 5, IKAR reduced its Russian wheat production estimate by 6% from 80.2 MMT to 75.5 MMT.

All sources point to lower Russian wheat production, but SovEcon and IKAR differ in how they see reduced exportable supplies affecting Russian export prices. Despite reducing its wheat production forecast, SovEcon estimates “Russia’s wheat crop issues are not big enough to impress the market.” Accordingly, it quoted Russian FOB values for 12.5 protein wheat (equal to 11.0 protein on a 12% moisture basis) at $197/MT on July 29 and at $195/MT on August 2. IKAR, on the other hand, believes the country’s reduced exportable supplies contribute to rising FOB values. According to IKAR, Russian FOB values for 12.5 protein wheat rose from $193/MT on July 23 to $196/MT on July 30.

How should these price differentials be interpreted? A look at recent tenders from Egypt’s state commodity-procurement agency, the General Authority for Supply Commodities (GASC) provides some insight. Through GASC, Egypt publicly offers to purchase wheat in set amounts from global exporters. Grain trading companies source wheat from multiple origins to bid on the GASC tenders, vying to offer the lowest FOB prices available. The tender results are available to the public, offering a clear picture of current export prices by origin source.

Often, conditions affecting exportable supplies in the Black Sea are apparent in GASC tender results. For instance, between May and July 2018, USDA reduced its Russian wheat production forecast by 7% on abnormally wet conditions affecting spring wheat planting and abnormally dry conditions affecting winter wheat areas. In 2018, for example, Black Sea supply concerns made their way into GASC’s tender results. On June 12, 2018, Russia’s lowest offer at the GASC tender was $209/MT FOB. By August 2, 2018, Russia’s lowest offer reached $235/MT FOB as supply concerns worsened.

While Russian 2019/20 wheat production is expected to increase 3% over 2018/19 levels to 74.2 MMT, its exportable supplies (beginning stocks plus production minus domestic consumption) are expected to fall 2.0 MMT from last year to 49.0 MMT in 2019/20. This year’s weather challenges are again present in recent Egypt’s GASC tender results. Between June 11 and August 6, the lowest FOB offer Russian wheat increased 4% from $197/MT to $204/MT. It is worth noting that the August 2 U.S. Wheat Associates (USW) Price Report estimated Gulf FOB export price for U.S. hard red winter (HRW) with equivalent protein for September delivery at $205/MT.

U.S. Wheat Associates (USW) believes these price trends could continue if hot, dry conditions persist across Russia’s predominant wheat growing regions.

Every month, USW publishes a graphic summary of the latest data from USDA’s WASDE report, including global wheat market factors, major country and regional export history and U.S. wheat supply and demand summaries by class. View the monthly summary here.

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Fair Weather and Adequate Soil Moisture on HRS Tour Predict Good Yield Potential

By Claire Hutchins, USW Market Analyst

This week, my colleague, Michael Anderson, and I joined four U.S. wheat customers from Mexico and Chile for the annual Wheat Quality Council (WQC) Spring Wheat Tour, an early survey of the 2019/20 hard red spring (HRS) crop in North Dakota and surrounding states. Today the tour estimated a final average yield potential of 43.1 bushels per acre (bu/ac) or about 1.17 metric tons (MT) per hectare for the 2019/20 North Dakota HRS crop. That is 5% higher than last year’s average of 41.1 bu/ac (1.12 MT/hectare). This year, tour participants made 371 stops to scout fields compared to 325 in 2018.

Each year, industry participants from across the United States and several countries gather in Fargo, N.D., and spend two and a half days in small scout teams, randomly stopping at several fields in a full day. Teams follow individual routes established many years ago by WQC to ensure most of North Dakota and parts of northern South Dakota and western Minnesota are scouted by tour participants. Teams measure yield potential, determine an average for the route and estimate a cumulative, daily tour average when all scouts come together again in the evening.

Twitter Post: Day 2 on #wheattour19. Yellow route, Car #3. Near Hensler, ND. 35 estimated bu/acre. Healthy looking wheat in the soft to hard dough stage.

Dusty boots. Another purpose of the tour is to help educate a broad range of stakeholders about wheat production challenges. Scouts are asked to look for disease, weed and insect pressure, as well as soil conditions. This year, scouts enjoyed warm, dry tour conditions, a big change compared to a very wet period from August 2018 well into this year. Soil moisture is still adequate in some parts of the region, but the July 16 U.S. Drought Monitor shows abnormally to severely dry conditions in north central North Dakota.

On the first day, the tour traveled from Fargo along routes covering most southern North Dakota counties. The cumulative first day average HRS yield potential was 45.6 bu/ac (3.07 MT/hectare), compared to 38.9 bu/ac (2.61 MT/hectare) in 2018, on adequate soil moisture conditions, warm weather and minimal disease or insect pressure. Participants surveyed 153 fields recording a range from 13.5 bu/ac to 96.2 bu/ac. We saw strong stands of healthy wheat that were three to four weeks from harvest, depending on weather. Fields were mostly dry but standing water could be seen alongside roads and fields. Temperatures were in the mid- to high-70s Fahrenheit (24 to 26 degrees Celsius) and moderate Fusarium Head Blight (also known as “scab”) development was seen along several routes.

Twitter Post: “Yellow route, east of Mapes, ND. Jack Detiveaux with @AmericanBakers is riding along with USW’s Claire Hutchins today. Estimated yield 48 bu/acre on 7″ rows.”

On the second day, teams traveled north and east through north central North Dakota where wheat does not compete as much with corn or soybeans for acreage as it does in the southeastern region of the state. Participants noted significantly larger fields, more mature wheat and less head scab pressure. The cumulative Day 2 average HRS yield potential was 40.6 bu/ac (2.74 MT/hectare), compared to 41.3 bu/ac (2.78 MT/hectare) in 2018. Participants surveyed 139 fields recording a range from as low as 14.2 bu/ac to a high of 74.7 bu/ac.

On the third day, participants traveled south and east back to Fargo for the final scout meeting hosted by the Northern Crops Institute (NCI). Teams noticed wetter field conditions, slight lodging, light scab pressure and more delayed overall crop development. The cumulative average HRS yield potential for the day was 48.6 bu/ac (1.32 MT/hectare), compared to 46.3 bu/ac (1.26 MT/hectare) in 2018.

Soil moisture impact. During the tour teams met many farmers in their fields. North Dakota farmers commented that beneficial rainfall throughout the spring and summer gave the 2019 HRS crop a boost over last year. Nearly every route averaged higher estimated yields on this wheat tour than the same routes in 2018, supporting farmer claims that 2019 could surpass 2018 harvest levels. One farmer near Wishek, N.D., expects 60 bu/ac on his farm due to cool temperatures earlier this spring and adequate soil moisture levels, which minimizes disease pressure and helps wheat yield potential. If realized, his farm would yield 39% higher than the tour’s total estimated average of 43.1 bu/acre (1.17 MT/hectare).

Days to harvest. Scouts on the tour identified most fields in the soft to hard dough stages, indicating harvest is two to five weeks away depending on weather. If warm, breezy conditions persist, some North Dakota farmers could begin the HRS harvest in as few as 20 days.

For more information, visit the WQC website at https://wheatqualitycouncil.org. Highlights and photos from the tour are posted on Facebook and Twitter using #wheattour2019.

Twitter Post: Yellow route, car #3. Near Barlow, ND. Estimated yield 37.3 bu/acre. A few spots of Fusarium Head Slight, but otherwise a good looking field.

 

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