It is time to price a portion of this year’s spring wheat crop, say analysts.
“We’re getting close to where this thing could top out,” said Bruce Burnett, director of markets and weather with Glacier FarmMedia June 26.
“This rally has far exceeded my expectations.”
John Duvenaud, analyst with Wild Oats Grain Market Advisory, agreed that with new crop bids of more than $7.50 per bushel, now is the time to act.
He would price some new crop but no more than 20 to 25 percent because he thinks there is potential for further upside.
“The fundamentals are real. High protein is in a shortage,” said Duvenaud.
“I wouldn’t be sold out, that’s for darn sure.”
However, he definitely would be sold out of old crop spring wheat.
“These are great prices. You’ve got about a $1 (per bu.) shift here that you didn’t have a month-and-a-half ago. Put the money in the bank,” said Duvenaud.
Burnett agreed that old crop should all be priced by now because there’s not much reward for carrying it any further.
While it is difficult to give a blanket recommendation because every circumstance is different, he feels farmers should be pricing some of this year’s production, although they may not want to price too much in the form of cash contracts because there’s always a quality risk with those.
He feels the market is approaching a value for spring wheat that is very healthy compared to winter wheat. He worries that North American millers and importers may be reaching the limit of what they’re willing to pay for high protein wheat.
“It probably can still run up here, but I think we’re going to be hitting a top in the market here soon,” said Burnett.
However, he believe there is little downside risk for spring wheat. He anticipates a healthy premium over winter wheat will remain through the first quarter of 2018 because of tightening stocks in the United States.
Duvenaud believes the drought damage in South Dakota, North Dakota and Montana has been fully priced into Minneapolis futures prices.
Jim Peterson, marketing director of the North Dakota Wheat Commission, forecasts 400 million bu. of U.S. spring wheat production, down from 534 million last year.
“In my mind there is still further room for upside,” he said June 19.
From June 19 to 26 Minneapolis wheat rallied 23 1/4 cents or 3.6 percent.
Burnett noted that yields have already been set for the majority of the U.S. spring wheat crop, and any rain that falls from now on will have little impact on production.
That is not the case in Canada where most of the wheat is at the heading stage of development.
“If we were to have a problem in Canada in terms of our spring wheat, that certainly could move the market even higher,” he said.
However, farmers need to re-member that the world is awash in wheat, so just because high protein wheat is getting tight, it can’t completely divorce itself from the overall bearish wheat complex.
Growers who haven’t priced any wheat should seriously consider doing so during the next couple of weeks because at today’s prices they will make a reasonable return with average yields.
“At least price a bit here,” said Burnett.
Duvenaud said the downside could be as much as $1 per bu. if the U.S. crop turns out better than everyone is expecting.
“I’d be grabbing some of this,” he said.