Spreads for higher-end spring wheat may be around the corner as hard red winters fail to meet millers’ plans
Farmers may be well advised to hold onto their spring wheat until later in the 2019-20 marketing campaign, say analysts.
Jim Peterson, policy and marketing director for the North Dakota Wheat Commission, expects protein premiums to widen later in the year as United States millers look for blending material for a low-protein U.S. hard red winter wheat crop.
“We’re hearing that millers are going to have to use more spring wheat in their grist this year,” he said.
Farmers in the U.S. are harvesting a hard red winter wheat (HRWW) crop with an average protein content of 11.2 percent, according to U.S. Wheat Associates, based on 408 of an expected 500 samples.
That is 1.2 percentage points below the previous five-year average and one of the lowest levels in decades.
“The footings are set for a stronger protein premium year for spring wheat growers in the U.S. and Canada,” said Peterson.
He is especially optimistic given that the spread between spring wheat and winter wheat prices is historically low.
Derek Squair, president of Exceed Grain Marketing, agreed that is one aspect of the wheat market that looks promising.
“Absolutely, there’s going to be huge premiums eventually,” he said.
“Really, it’s a matter of hanging on to your wheat and selling other commodities like barley.”
The other reason to do that is to wait for a corn rally that drags wheat prices higher. He believes the U.S. Department of Agriculture has overestimated corn yield and acreage.
Peterson said the anticipated “protein bump” has not materialized yet south of the border.
Premiums at local elevators in North Dakota are averaging around five cents a bushel per percentage point, which is well below average.
One of the reasons the response has been muted is the high carryover from the 2018-19 hard red winter crop, which had a much better average protein level of 12.3 percent.
There was also a lot of 15 percent protein spring wheat carryout that farmers started selling just before harvest to make room for new crops.
Those inventories are masking what will eventually become a shortage of high protein wheat.
Millers have contract specs for protein levels that vary from year-to-year depending on available supplies.
“But the factors they’ll generally come short on is some of the mixing qualities or absorption and loaf volume. That’s when they’ll have to add in that U.S. spring wheat and Canadian spring wheat,” said Peterson.
An Aug. 23 harvest report prepared by U.S. Wheat Associates said preliminary laboratory and baking analysis indicate that absorption, peak time and stability of the HRWW crop are all lower than industry targets.
Peterson said the early results of the U.S. spring wheat harvest show protein levels are in the 13 to upper 14 percent range, which is about normal.
That is surprising given the cool and wet growing conditions. However, growers are starting to see some pockets where there are quality issues and some low, 12 percent wheat coming off the combine.
“We’re kind of anxious to see how it grades out,” he said.
Squair has seen some preliminary samples from Canada’s spring wheat harvest with protein levels in the 14 to 14.5 percent range.
That is from the early-seeded crop that suffered through dry conditions. He expects the later-seeded crop will be higher-yielding but lower in protein.
Overall, he anticipates an average crop size but higher-than-usual protein levels, in the 13.4 to 13.5 percent range. So patient farmers should be able to take advantage of higher premiums for protein later in the crop year.