Wheat protein drop benefits Canada

Average protein levels in the U.S. hard red winter wheat crop are reported to be 11.2 percent, which is slightly below last year’s disappointing 11.3 percent average and well below the five-year average of 11.7 percent.  |  Reuters/Todd Korol photo

Low protein levels in the U.S. hard winter wheat crop are expected to increase demand for Canadian spring wheat

It looks like another year of low protein for the United States hard red winter wheat crop, which should stimulate demand for spring wheat, say analysts.

U.S. Wheat Associates is reporting average protein levels of 11.2 percent after reviewing one-quarter of the anticipated samples for the 2020 HRW crop.

That is slightly below last year’s disappointing 11.3 percent average and well below the five-year average of 11.7 percent.

“That’s absolutely shocking me,” said MarketsFarm analyst Bruce Burnett.

His only explanation is that growers decided to forego the last round of fertilizer applications in late January-early February due to lacklustre prices.

The shortfall means that flour mills in the southern U.S. that typically rely exclusively on HRW for their grist are going to have to bring in some hard red spring wheat (HRS) to get the desired 12.4 percent protein content.

If they pull that product in from states like North Dakota and Montana, the U.S. will likely have to import more spring wheat from Canada to meet the requirements of the northern mills or U.S. export markets.

“It’s positive news,” said Burnett.

“At the end of the day, we’re going to see stronger demand.”

Jim Peterson, policy and marketing director for the North Dakota Wheat Commission, said Burnett isn’t the only one surprised by the initial results.

“It definitely has caught the market off guard,” he said.

Peterson thinks another contributing factor was the early-season frost damage.

He anticipates better results to come in western Kansas and part of Colorado, which experienced intense drought.

However, he thinks there will be superb yields and dismal protein levels in Montana and South Dakota, which could bring the national average back down again.

He agrees with Burnett that at the end of the day it will be a below-average protein HRW crop and that means more blending of HRS in U.S. mills.

The other bit of good news for Canadian growers is the rapidly declining condition of the U.S. HRS crop. Ratings have dropped to 69 percent in the good to excellent category as of July 2, down from 84 percent on June 19.

It is also encouraging that there has been good movement of U.S. HRS wheat. Exports in 2019-20 were 7.97 million tonnes, an 11 percent increase over the previous year.

Another 2.09 million tonnes have been sold so far in 2020-21, a 16 percent increase over the same period a year ago.

Grain companies are reporting phenomenal movement of Canadian grain as well in recent months due to reduced rail competition from other commodities.

In other bullish news, the USDA recently dropped its 2020 spring wheat seeded acreage estimate to 12.2 million acres, down from the March forecast of 12.59 million acres.

Statistics Canada did likewise, dropping Canadian plantings to 17.93 million acres in June, down from the March forecast of 18.77 million acres.

Burnett said the “big asterisk” is what kind of crop growers in Western Canada are going to harvest. Conditions have been all over the map so far this year.

“This has not been the smooth, wonderful growing season that we were hoping for,” he said.

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