Big stocks offset acreage cut

American winter wheat acres down five percent, but exports sluggish

U.S. farmers planted less winter wheat than expected, but it didn’t lift wheat futures.

Producers seeded 40.45 million acres of the crop, according to a U.S. Department of Agriculture survey of more than 83,000 farmers in December.

It is well below the average trade estimate of 42.57 million acres and last year’s crop of 42.4 million acres.

However, a smaller U.S. winter wheat crop did not spark a wheat price rally.

“Even though that looks supportive, in all honesty I think wheat prices are going to continue to go down,” said Errol Anderson, analyst with ProMarket Wire.

“What’s trumping it is the strength of the U.S. dollar.”

A strong U.S. dollar provides a competitive advantage to wheat priced in the weaker Russian ruble or the European Union euro.

“In order to compete, the U.S. has to drop their price,” said Anderson.

It also didn’t help that world wheat ending stocks blossomed to 196 million tonnes in January’s World Agricultural Supply and Demand Estimates (WASDE) report, up from trade estimates of 194.6 million tonnes.

“When you look at the world wheat market, it’s bearish,” said Anderson. “The drop in the American acreage doesn’t mean very much.”

Derek Squair, president of Agri-Trend Marketing, believes reduced wheat acres will be the trend around the world this spring.

“We’ve got some lower prices now, and it’s hard to make money on wheat today,” he said.

“Wheat is one of the (crops) that are lagging behind in the profitability department.”

The USDA is forecasting 29.5 million acres of hard red winter wheat, down three percent from 2014, 7.5 million acres of soft red winter wheat, 12 percent below last year, and 3.48 million acres of white winter wheat, up two percent from 2014.

Hard red winter wheat acres were down significantly in Colorado, Kansas, Montana, North Dakota, Oklahoma and Texas, but there were large increases in Nebraska and South Dakota.

Conditions in the hard red winter wheat crop varied across the states, with most of the acreage rated in fair to good condition.

Squair said it is going to take more than a decline of a couple million acres in U.S. winter wheat plantings to pull prices out of the doldrums.

Markets need something like Russia further curtailing exports or a weather disaster in North America or Europe to boost prices to profitable levels.

Squair expected more market drama out of the January WASDE report because it is the first report of the year to incorporate actual quarterly stocks numbers into its ending stocks estimates.

“Typically this is a very dynamic report,” he said.

“The market usually reacts very strongly one way or the other at this report, but there was really not a whole lot of surprises in this one.”

Corn prices responded positively to news that U.S. production was 14.22 billion bushels, down from the pre-report trade estimate of 14.35 billion bu. Average yield was reduced to 171 bu. per acre from 173.3 bu. per acre in the December WASDE.

However, the soybean numbers in the USDA report were bearish with a forecast for 410 million bu. of U.S. carryout, which was higher than trade expectations of 393 million bu.

Anderson advised growers to quickly jump on any price rallies, given today’s fundamentals.

“When you get those opportunities, like $10 canola, in an environment like this, that’s actually a good price,” he said.

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