Canadian farmers look on track to harvest their largest wheat crop since the early 1990s.
Wheat crops around the world are larger than last year with global production up about eight percent.
In its September report, the U.S. Department of Agriculture pegged wheat production this year at 708.86 million tonnes, up 3.5 million from last month’s report.
Increases in the estimates for Canada and the European Union accounted for most of the global increase.
Global stocks by the end of this crop year are expected to be 176.28 million, up 3.3 million from the August outlook.
Until this report, the USDA thought ending stocks were going to decline a little from the 2012-13 ending stocks of 173.85 million, but now a slight increase is expected.
That news, as well as the expected record U.S. corn crop, are keeping downward pressure on wheat prices.
The decline is limited by the fast pace of exports. U.S. wheat exports this crop year, which are shipments plus outstanding sales, have hit 15.8 million tonnes, up 38 percent from last year at the same time.
The European Union and Ukraine are also showing major advances on last year’s wheat export pace. China, Egypt and Brazil, the top three global buyers, are all importing lots of wheat.
Quality problems in its own crop means China is expected to be the largest buyer of wheat this year, buying 9.5 million tonnes and surpassing Egypt’s expected imports of nine million. Last year, China bought only three million tonnes.
Iran’s president said last week that it would have to import 7.5 million tonnes of wheat this year, putting it in third place along with Brazil. The USDA has not yet accounted for this unexpected increase. It has Iran down for four million tonnes.
Egypt is keeping up a steady import pace despite the recent turmoil. The imports are needed to keep bread prices low and prevent additional unrest.
Brazil’s import needs were in-creased when frost hit its domestic crop.
The USDA put Canada’s crop at 31.5 million tonnes, up from its August forecast of 29.35 million. Statistics Canada’s August forecast was 30.56 million tonnes, but with many anecdotal accounts of record yields, it is easy to see how the crop could reach 31.5 million tonnes or more.
Canada’s wheat farmers last produced 30 million-plus tonnes in 1991 and 1990. The crop was about 32 million tonnes in both years.
But back then, the harvested area was 34.8 million acres, compared to 25.5 million this year.
We have already reported that Canada’s large crop is leading to lower protein levels in spring wheat and durum. It is the same in North Dakota.
Wheat crops in Russia and Kazakhstan are suffering quality problems because of rain at harvest.
Expect to see larger premiums and discounts related to protein.
Wheat prices in coming weeks will depend a lot on corn harvest results in the United States. Will strong yields outside of the Midwest make up for poor yields in places that traditionally have the highest per acre production?
Also, many analysts expect the USDA will have to lower its corn harvested acreage number to account for prevented planting this spring.
Another factor in a few weeks will be the pace of U.S. winter wheat seeding. There was concern that parts of the winter wheat region were dry.
The concern has abated somewhat after heavy rain in western and central Kansas, which is part of the same system that caused flooding in Colorado.
It is also dry in Argentina, where its wheat crop is being seeded.
Basis will also be a factor in prairie farmers’ wheat returns.
This great crop will challenge Canada’s grain logistics system.
The grain handling industry believes it can do a better job now that CWB is not involved. It worked well last year with an average crop; we’ll see how it does this year when movement is expected to strain capacity.