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New crop wheat price forecast looks similar to 2018-19

As the crop year counts down to its final weeks, Canadian wheat farmers have seen good demand for their product at prices similar to the previous year.

Looking ahead to the coming crop year, global production is expected to recover somewhat from the tight crop of 2018-29 when the European Union, Russia and Australia all suffered through dry weather.

However, at this point it looks like most areas will produce average, not bin-busting crops and the market’s foundation could be well supported by the problems in the United States’ corn crop.

A wild card for Canada in the coming year is whether China will extend to wheat the punishment it is already meting out to canola and meat.

The combines are already rolling in winter wheat in the United States and Black Sea region.

Harvest started late in America after a cool, wet spring, but early indications are that crops that were not flooded out or damaged by hail came through with surprising results.

Worries that the delayed crop would be hit with early summer heat were calmed by a mild June that caused no stress.

The largest winter-wheat-producing state, Kansas, will likely see lower protein after the wettest May on record, but Oklahoma expects higher protein, providing blending opportunities.

The June 11 U.S. Department of Agriculture forecast winter wheat production at 34.69 million tonnes, up 7.7 percent from last year.

Total U.S. wheat production is forecast at 51.78 million tonnes, up one percent from last year. Gains on the winter wheat side are partly offset by acreage reductions in spring wheat.

The USDA in June forecast Russia’s total wheat crop at 78 million tonnes, up from last year’s disappointing 71.7 million but still short of the bumper crop two years ago of 85.2 million.

Hot, dry weather in June might have slightly trimmed yield and future estimates might cut the total by a million tonnes.

Large parts of Europe endured record hot temperatures recently and there has been a drought in Spain, but overall the weather has been better than last year.

The USDA pegged the EU wheat crop at 153.8 million tonnes, up from 137.2 million last year and 151.1 million two years ago.

Australia is still suffering drought in some places, particularly northern New South Wales and Queensland. Drought last year slashed production to only 17.3 million tonnes.

The USDA June forecasts put the 2019-20 crop at 22.5 million tonnes, but Rabobank in the same month said it would be unlikely if the crop topped 20 million tonnes.

The USDA thinks Ukraine will have an excellent crop of 30 million tonnes, up from 25 million last year.

The USDA expects global wheat production will recover to 780.3 million tonnes from 731.7 million last year. The small crop last year was less than global demand and so year-end stocks shrank to 276.6 million tonnes, but in 2019-20 production is expected to outpace demand and stocks are forecast to rise to 294.3 million.

The production problems of 2018-19 in other parts of the world helped Canada post record large exports. With only a few weeks to the end of the crop year it seems clear that the Agriculture Canada forecast for 19 million tonnes of wheat exports, excluding durum, will be reached. That is about 1.4 million tonnes more than the year before.

Canada boosted sales to many countries but none more than to China, where at the end of May cumulative Canadian wheat imports stood at 1.85 million tonnes, almost double what they were at the same point the year before. The USDA forecast that China will import only three million tonnes of wheat from all sources in the year, so it is an achievement to supply about two-thirds of the total.

China was in second place in the list of buyers of Canadian wheat, a stone throw behind Indonesia, which has bought about two million tonnes.

Even with the tensions between China and Canada rising in May, China imported 325,900 tonnes from this country in the month.

Agriculture Canada forecasts that wheat exports in the new crop year will match the 19 million tonnes posted this year.

To achieve that will likely require China’s continued buying.

As for price, Agriculture Canada forecasts an average for 2019-20 of $220 to $250 per tonne for 13.5 percent protein No. 1 Canadian Western Red wheat basis Saskatchewan. That is similar to the current year estimate of $240 to $250.

The USDA forecast average farm price for wheat also sees prices in 2019-20 will be similar to the current year. It pegged the price at US$5.10 per bushel, compared to $5.20 in the year that is wrapping up.

But that could change if the U.S. corn harvest disappoints.

There are many questions still about the acreage of the corn crop, seeded as torrential rains drowned so much of the Midwest. Its progress and condition are well behind the normal pace.

Drew Learner of World Weather forecasts that the U.S. will not see an extended warm fall. At best there will be a normal frost and freeze and there is a heightened potential for early frost, particularly in the northern Midwest.

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