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Volatile Wheat Markets Highlight Unexpected Opportunities

In late May, U.S. Wheat Associates (USW) reported on bullish wheat market sentiment, driven by adverse weather and changing supply and demand conditions. Since then, the volatility that has remained a constant in wheat markets for more than two years returned. From May 24 to June 21, CBOT, KCBOT, and MGEX wheat futures dropped 69 cents, 55 cents, and 58 cents, respectively.

Until global supply and demand is more defined, markets will remain sensitive to changes in weather, perceived consumption, and supply shifting events. However, the recent volatility may help illuminate unexpected buying opportunities for U.S. wheat.

Line chart shows volatility in the wheat market from March 2022 through May 2024

Markets have been volatile over the last few months. From May 24 to June 21, CBOT, KCBOT, and MGEX wheat futures dropped 69 cents, 55 cents, and 58 cents, respectively. Source: U.S. Wheat Associates Price Report.

A Series of Trend Reversals

In March 2024, markets hit multi-year lows as ample wheat stocks from Russia and record Black Sea exports weighed on global wheat prices. Starting in April, the market’s “weather eye” saw drought conditions and severe frost damage in central and southern Russia prompting a reversal and prices rallied back to 2023 levels. Confirmed by the June World Agricultural Supply and Demand Estimates (WASDE), the Russia production estimates decreased by 8.5 MMT on the year to 83.0 MMT, the lowest level since 2021/22. Likewise, persistent wet, cool weather and flooding decreased the European Union (EU) planted area and diminished French and German yield potential, resulting in a yearly decrease of 3.7 MMT to 130.5 MMT.

This world map from USDA shows changes in wheat production contributing to volatility in world markets.

The June WASDE decreased Russia production estimates by 5.0 MMT to 83.0 MMT, due to drought conditions and severe frost damage. Like wise, persistent wet, cool weather and flooding in the EU prompted USDA to decrease production by 1.5 MMT to 130.5 MMT. Source: USDA Wheat Outlook.

The June WASDE decreased Russia production estimates by 5.0 MMT to 83.0 MMT, due to drought conditions and severe frost damage. Like wise, persistent wet, cool weather and flooding in the EU prompted USDA to decrease production by 1.5 MMT to 130.5 MMT. Source: USDA Wheat Outlook

Adding further strain on the market, rumors began circulating that India may begin importing wheat, with stocks sitting at 7.5 MMT, the lowest in 16 years. In response to supply strains, wheat futures prices climbed throughout April and May, touching levels not seen since Fall 2023 and adding support to world cash values.

Meanwhile, on June 6, major world importer Türkiye announced a ban on wheat imports from June 21 through October to control domestic prices. Adding validity to the claims, the June WASDE reduced the Turkish import forecast from 10.5 MMT to 9.5 MMT. The announcement suggested weakened demand prospects and sent markets lower. Contributing to the new narrative, private analysts also suggested the impacts on Russian yields were not as severe as predicted. Furthermore, the U.S. production outlook now seems more favorable and harvest progress continues rapidly. As of June 23, 40% of the winter wheat crop is in the bin, while conditions in the remaining acres sit at 52%, up from 40% last year. Similarly, 71% of spring wheat rates good or excellent, a 21-point jump from the previous year.

The combined impacts of Türkiye, alleged improvements to Russia production, and the U.S. harvest has depressed prices, bringing them back in line with, or in the case of HRS slightly below, their position in March 2024.

Eyes Out for Opportunity

Despite the recent volatility, the spread between competing origins has narrowed over the last few weeks. According to AgriCensus price data, as of June 21, Russian, French, Romanian, and Soft Red Winter hovered in a narrow range between $230-$235/MT, a considerable decrease from the $17/MT spread between Russian wheat and the next cheapest origin noted in March. Likewise, Gulf HRW prices trend lower, with the June 21 U.S. Wheat Associates Price Report putting Gulf HRW with 11.5% protein at $243/MT, in line with German and Polish origins and only $12/MT above Russian prices, a much closer spread compared to a $67/MT difference observed in March 2024.

As U.S. wheat prices align more closely with other export prices, it presents a chance for international buyers to take advantage of the recent price trends. Supported by exceptional quality, a dependable supply chain, and unsurpassed customer service from USW colleagues, U.S. wheat offers an exceptional value.

This line chart shows the relationships and volatility in the global wheat market.

The June 21 U.S. Wheat Associates Price Report put Gulf HRW with 11.5% protein at $243/MT, in line with German and Polish origins and only $12/MT above Russian prices, a much closer spread compared to a $67/MT difference observed in March 2024. Source: AgriCensus Price Data and the U.S. Wheat Associates Price Report.

 

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Initial 2024/25 Estimates Add to Bullish Market Sentiment

Topping off a volatile, weather driven week, the May World Agricultural Supply and Demand Estimates (WASDE), released on May 10, 2024, forecast a tighter global wheat balance sheet and decreased production in several major wheat exporting countries. Moreover, USDA foresees factors that contribute to bullish market sentiment. It expects both world production and consumption to reach record levels in 2024/25, with consumption outpacing production for the sixth time in the past seven years.

The recent updates supported an already bullish market sentiment. From April 18 to May 10, Chicago Board of Trade wheat futures jumped from $5.53/bu to $6.63/bu on the day of the report’s release, and on May 28 July CBOT futures were up over $7.00/bu. The following highlights key factors to watch from the initial 2024/25 estimates and outlines the potential implications for the new crop.

This bar and line chart shows USDA data relationships between world wheat production and use from 15/16 to 24/25.

USDA expects that both global production and consumption will hit record highs in 2024/25 at 798.2 MMT and 802.4 MMT, respectively. Consumption also outpaces production for the sixth time in the past seven years. Source: May WASDE.

Mixed Outlook in Major Exporters

The outlook for production levels in major exporting countries is variable for 2024/25. The May WASDE projects an increase in total wheat production; however, production in major exporting countries stays relatively steady, declining by just 200,000 MT to 321.0 MMT.

Following reports of dryness and potential frost damage in Russia, USDA decreased Russian production to 88.0 MMT, the lowest level since 2021. Similar weather-related issues led to a 2.0 MMT decrease in Ukrainian wheat production to 21.0 MMT. USDA also lowered EU production estimates by 2.2 MMT year-over-year to 132.0 MMT as heavy rains and flooding degrade crop conditions, particularly in major exporter France, contributing to bullish market factors.

Nevertheless, increased production in the United States, Canada, and Australia offset the reductions. U.S. wheat production estimates sit at 50.6 MMT, up 1.3 MMT from last year, but 1.1 MMT below the USDA Outlook Forum estimates. Canadian production increased 2.1 MMT to 34.0 MMT on normalized weather, while Australian production rose 3.0 MMT to 29.0 MMT in anticipation of an upcoming La Niña weather event.

Notably, India and China registered the largest production increases, at 3.5 MMT and 3.4 MMT, respectively; however, their output does not influence exportable supplies.

This bar chart shows USDA's data on wheat supplies in 7 major exporting countries from 15/16 to 24/25.

Production in major exporting countries is projected to remain relatively steady, declining by just 200,000 MT to 321.0 MMT. Source: May WASDE.

Tighter Stocks in 2024/25

The initial outlook for the 2024/25 balance sheet points to a bullish market trend. Global wheat consumption may exceed production by as much as 4.2 MMT, further tightening stock levels. As a result, 2024/25 ending stock level estimates decrease to 253.6 MMT, a 4.2 MMT reduction from the year prior, and the lowest level since 2015/16. Major exporter ending stocks are forecast 8% lower at 52.6 MMT, while the global stocks-to-use ratio, excluding China, is expected to tighten to 18%, down 1 point from the year prior and the lowest since 2007/08.

This bar and line chart shows USDA data relationships between world wheat production and use from 15/16 to 24/25.

Global wheat consumption may exceed production, further tightening stock levels. As a result, 2024/25 ending stock level estimates decrease to the lowest level since 2015/16. Likewise, the global stocks-to-use ratio, excluding China, is expected to tighten to its lowest since 2007/08. Source: May WASDE.

Stay Tuned for Updates

Looking ahead to marketing year 2024/25 and beyond, the weather and global production outlook will ultimately dictate wheat availability and quality, while a continued decline in world-ending stocks may have a bullish market influence on future price trends.

However, in the short term, prices will stay volatile in response to rapidly changing conditions and news. As always, it is important to remember that the May estimates are the initial projections for 2024/25 and are subject to change as more information becomes available. In July, USDA will release the first estimates for U.S. wheat production and exports by class, in addition to more detailed global production information. As the Northern Hemisphere harvest continues, U.S. Wheat Associates (USW) remains dedicated to providing dependable and up-to-date information for buyers, millers, and end users alike.

By USW Market Analyst Tyllor Ledford.

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Key Market Mover: Weather Developments Generate Wheat Price Rally

Across the Northern Hemisphere, wheat price and crop development are dominating market discussion. Soon, the first harvests of the 2024/25 crop year will provide more concrete information on supply availability and quality. Until then, weather conditions will play a crucial role in global grain markets as winter wheat enters late growth stages and spring wheat planting progresses.

USDA map of the world shows large agricultural regions in green and comments about crop conditions in each region.

In May, the Northern Hemisphere winter wheat crop reaches critical stages of crop growth, while spring wheat planting is underway. During sensitive development stages such as heading and flowering, wheat is more susceptible to weather related stress, which may negatively affect yield potential. Source: USDA FAS.

Although world wheat prices were trending steadily lower over the last year, shifting weather patterns have prompted a recent reversal. Since April 18, 2024, the July Chicago Board of Trade (CBOT) wheat futures contract has surged from $5.53 per bushel to $6.87 per bushel as of May 13, reaching its highest level since August 2023 (ProphetX chart image at the top of this page). Following is a look at recent market-moving weather developments and factors to watch as the 2024 harvest approaches.

Weather Swings Bring Attention to Russia

In the past month, varied weather conditions have raised concerns about the Russian wheat production outlook. Recent reports from Sovecon indicated that from mid-March to mid-April, moisture levels in southern Russia were 60% to 80% of normal and minimum temperatures were 2°to 4°C above average. Meanwhile from May 3 to 5, central and southern Russian crop growing areas suffered from severe frosts, potentially affecting the development of wheat, sugar beets, and other crops. Media sources reported air temperatures as low as -4.6 °C (23.7 °F) and soil temperatures near -5 °C (23 °F).

Map of Russia showing major agricultural regions where wheat is grown in green.

Weather fluctuations have raised concerns about the Russian wheat production outlook. The combined impact of dryness throughout southern Russia’s growing areas and severe frosts in central and southern Russia prompted IKAR analysts to reduce its production estimates by 5.0 MMT to 86.0 MMT. Source: USDA FAS.

The combined impact of dryness and severe frosts prompted IKAR analysts to reduce their production estimates by 5.0 MMT to 86.0 MMT. Similarly, the May USDA World Agricultural Supply and Demand Estimates (WADE) predicted a 3.5 MMT drop for 2024/25 Russian output year over year. Throughout 2023 and early 2024 the large supplies of Russian wheat flooded the world market and depressed prices, highlighting the sizable influence Russia projects on global grain markets. Therefore, lower yield potential in Russia would have a significantly bullish impact on global prices.

Variable U.S. Conditions

On the domestic front, the overall outlook for the U.S. Southern Plains remain more optimistic as moisture levels and drought conditions improve. However, over the last few weeks, dry and variable conditions have raised concerns regarding 2024 production prospects. In Kansas, the largest HRW producing state, crop conditions have deteriorated rapidly, going from 57 percent good to excellent on February 25 to only 31 percent good to excellent by May 12. Likewise, conditions have worsened in Colorado, Oklahoma, and Texas due to windy and dry weather.

The persistent lack of moisture in parts of the Southern Plains may keep wheat prices elevated, but nevertheless, improving conditions in other areas and the potential for timely rains in drought afflicted regions could offset the impact. Overall, U.S. conditions still remain much improved from 2023, with 50% of all winter wheat rated good to excellent.

Results of the Wheat Quality Council’s Hard Winter Wheat tour May 14 to 16 will have their own, if brief, impact on futures prices.

Expect Increased Volatility

Until the crop reaches maturity and harvest begins in the Northern Hemisphere, weather will heavily influence futures markets. In the short term, prices will stay volatile in response to rapidly changing conditions and news. For up-to-date information regarding the current crop conditions and harvest outlook, look for the weekly USDA Crop Progress Report and the U.S. Wheat Associates Harvest Report. Also, watch the next “Wheat Letter” for discussion on the newest changes to the May WASDE and the first glimpse of what the 2024/25 marketing year will bring.

By USW Market Analyst Tyllor Ledford

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Marketing Year 2023/24 Countdown; First Look at New Crop U.S. Wheat Sales

With just 6 weeks left in marketing year (MY) 2023/24, many buyers are locking in purchases for June and July shipment, shifting much of the export focus to MY 2024/25, or “new crop,” U.S. wheat sales that are gradually ramping up at a faster pace compared to a year ago. The following will outline MY 2023/24 sales pace to date and provide an initial look at MY 2024/25 export sales.

2023/24 Recap

Throughout MY 2023/24 market conditions turned back to buyers. From June 1, 2023, to present, U.S. wheat FOB export price dropped 15% on average for all classes and export locations. This trend was driven by Black Sea competition pressuring U.S. and global wheat prices. As of April 30, 2024, Russian wheat is still the cheapest on the world market, at $214 per metric ton (MT) FOB (12.5% protein on a dry moisture basis).

As world wheat values fall, U.S. prices follow, and the lower prices have helped boost exports for two U.S. wheat classes. In MY 2023/24 to date, China imported over 1.2 million metric tons (MMT) of soft red winter (SRW), contributing to a 51% increase in total SRW export sales as of April 18, 2024. Likewise, hard red spring (HRS) sales hover 13% ahead of the year prior at 6.4 MMT, making up 34% of the total U.S. wheat export sales. Nonetheless, the positive export performance for HRS and SRW does not offset the significant decline in hard red winter (HRW) and soft white (SW) exports. To date, HRW exports sit at 3.6 MMT, down 28% from the year prior. Likewise, SW exports sit 15% below last year’s pace.

We can expect the 2023/24 sales pace to decline further as customers seek shipments for June and July delivery. For the week ending April 18, for example, net sales of just 82,000 metric tons (MT) were reported for delivery in 2023/24. Despite increased exports for some classes, USDA expects wheat exports to reach 19.3 MMT, the lowest level since 1971/72 if realized. Moreover, the current pace puts total commitments to date 500,000 MT below the projections.

This line and bar chart compares USDA's export estimate to the by-week pace of sales in 2022/23 and 2023/24 and to the 5-year average sales pace, indicating a decline in sales.

For the week ending April 18, net sales of 82,000 MT were reported for delivery in 2023/24. Year-to-date 2023/24 commercial sales totaled 18.8 MMT. USDA expects 2023/24 U.S. wheat exports of 19.3 MMT, and commitments to date are 97% of total projected exports. Current exports sit just 1% ahead of last year’s pace, but 17% below the five-year average. Source: USDA FAS Export Sales.

Strong Start

Despite the slower pace of U.S. wheat sales in MY 2023/24, the new crop outlook for 2024/25 is more optimistic. Buyers are beginning to take advantage of lower prices and securing early shipments for MY 2024/25. For the week ending April 18, the total known outstanding sales for MY 2024/25 reached 2.1 MMT, 112% ahead of last year’s pace, with net sales coming in at 371,858 MT.

HRS continues to lead export sales, with 743,580 MT sold to date, a 211% increase from last year. Likewise, soft white sales are up 670% at 675,180 MT, HRW is up 100% to 347,200 MT, and durum sales are up 80% at 66,500 MT. Acting as the outlier, SRW sales are 34% behind last year, at 314,200 MT as prices remain elevated relative to SW.

This bar chart shows new marketing year U.S. wheat sales to the top 10 countries by volume in 2023 and 2024 as of mid-April.

For the week ending April 18, the total known outstanding sales and accumulated exports of all classes of wheat for the 2024/25 marketing year reached 2.1 MMT,112% ahead of last year’s pace, with net sales coming in at 371,858 MT. HRS export sales sit 211% above last year, SW 670% higher, HRW 100% higher, and durum 80% higher. Acting as the outlier, SRW sales are 34% behind last year’s pace. Source: USDA FAS Export Sales.

Contributing to the sales increase, several customers have already bought more U.S. wheat in MY 2024/25 compared to this time last year. So far, South Korea is the top U.S. wheat buyer, with 389,500 MT booked, a significant increase from 45,300 MT the previous year. During the week of March 18, SW prices fell as low as $219/MT (according to the U.S. Wheat Associates Price Report) tracking the decreasing trend in the global wheat market. During this period, South Korean feed grain importers bought feed wheat cargos from the U.S., boosting their SW imports. However, according to Channy Bae, Country Director, USW/Seoul, this is a short-term opportunity for South Korean feed manufacturers and their purchases will shift relative to the price of corn and other origins.

The next largest new crop buyers to date are the Philippines, Mexico, and Japan with year over year increases of 348%, 30% and 83%, respectively. Likewise, buyers in Thailand and Panama have significantly outpaced their 2023/24 purchases, coming in at 239% and 336% higher. Some of the recent increases can be attributed to customers’ need for product and shipment cadence as well as customers taking advantage of more competitive pricing.

This bar chart demonstrates the increased U.S. wheat export sales pace to 10 countries to date in 2024 compared to the same period in 2023.

To date, South Korea, the Philippines, and Mexico are the top buyers of U.S. wheat. Year over year increases of 760%, 348%, and 30% have been recorded thus far. Buyers in Thailand and Panama have also significantly outpaced their 2023/24 purchases, coming in at 239% and 336% above last year’s level. Source: USDA FAS Export Sales.

Stay Tuned

Stronger early 2024/25 U.S. wheat sales come with one caveat. Traders identify farmer sales as a potential limiting factor moving into MY 2024/25. The lower wheat prices provide less incentive for farmers who use storage as a hedge to sell. The lack of liquidity limits the ability of exporters to aggressively price and market grain to meet the increased demand.

Looking ahead, the May 2024 World Agricultural Supply and Demand Estimates will offer additional insights on U.S. wheat production, exports, and global demand. Likewise, the weekly Commercial Sales Report will provide real time updates to the U.S. wheat sales pace. As always, U.S. Wheat Associates remains committed to offering information and support for buyers transitioning into the 2024/25 marketing year.

By Tyllor Ledford, USW Market Analyst

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Articles of Interest – The Latest News About the U.S. Wheat Crop

Every weekday, U.S. Wheat Associates (USW) searches U.S. and global media for news about the U.S. wheat crop and the world wheat market. USW shares the news of the day as a service to our domestic stakeholders. The articles of interest on Monday, April 29, summarized below also have value for our overseas customers.

Wheat Market Rally

A market analysis article presented April 26 on “Farm Journal AgWeb” reached out to Allison Thompson of The Money Farm to describe a 7-day rally in U.S. wheat futures prices while corn and soybean futures declined. Thompson said concerns about dry conditions in the Central and Southern Plains hard red winter (HRW) region as well as southern Russia and western Canada sparked commercial investors to cover long-held short futures positions.

In the April 26 USW Price Report, Market Analyst Tyllor Ledford related news from traders that the futures rally did prompt farmers to sell old-crop wheat. Storms from April 26 to 28 sadly included a deadly, destructive tornado outbreak but also significant rain for some HRW and SRW production regions. So, early on April 29, HRW and soft red winter (SRW) futures were down. The precipitation missed much of western and south-central Kansas, eastern Colorado, and western Nebraska, however.

Image from USW Price Report page describes the latest information on US wheat export market and prices.

The April 26, 2024, USW Price Report noted that farmers increased sales of old crop HRW and HRS wheat during a recent rally in U.S. wheat futures prices.

Spring Wheat

Also on April 26, North Dakota Wheat Commission Director of Policy and Marketing Jim Peterson told “Farm & Ranch Guide” that there are both positive and negative price influences for U.S. hard red spring (HRS) wheat.

Phote of Jim Peterson

Jim Peterson

“On the positive note, it looks like an earlier planting season than a lot of other areas relative to the last few years, so that’s typically yield positive,” he explained. “The reason we’re seeing earlier planting is a lot of areas are abnormally dry to critically dry. If we don’t get a big shift in weather patterns here, we could see some early season moisture stress on the spring wheat region. Then we’ll see what happens with acres. Right now, the forecast is for unchanged total acres nationally, maybe up slightly,” he added.

Despite strong Canadian competition, Peterson said some demand fundamentals support the U.S. spring wheat market. Commercial sales of HRS as of April 25 were 13% ahead of a year ago at 6.40 million metric tons (MMT) and more than USDA’s projections.

Potential Wheat Supply Chain Disruption

Along with the farm and grain handling industries in the Pacific Northwest export system, USW is closely watching the political fight about the potential breaching of four dams on the Lower Snake River. An agricultural media company in the region with a website called AgProud.com published an interview about the debate with Scott Corbitt, General Manager of the Post of Lewiston in Idaho. In the interview, Corbitt describes the value of the port to the region and the overseas customers it helps serve.

U.S. grain handlers purchase wheat from farmers and transport approximately 24 million bushels (0.65 MMT) of wheat by barge through the Port of Lewiston every year, he said, and the companies barge 10% of total U.S. wheat exports through the Colombia Snake River System. Wheat exported from Idaho alone exceeds $300 million annually, Corbitt told AgProud.com. He added that breaching the Lower Snake River dams would result in a huge economic hit for the region disrupt the efficient flow of U.S. soft white (SW), HRS and HRW wheat to export elevators downstream in the Portland area.

 

Ice Harbor Dam on the Lower Snake River System in Washington state.

Read more information on the threat to barging on the Colombia Snake River System online here.

Eye on the Crop

“Capital Press” reporter Matthew Weaver recently wrote about how researchers at Washington State University have installed a wheat field camera at the university’s dryland research station in eastern Washington state. The still images taken several times a day of a spring SW wheat field can be viewed online at the research station website and on its YouTube channel.

A spokesperson for the station said the camera is a way for overseas and domestic wheat buyers, as well as non-farmers, to see how the crop progresses and to get more information about sustainable wheat production. The station plans to add short videos about the spring SW wheat crop to the service throughout the growing season and harvest.

The Washington Grain Commission, a long-time USW member organization co-sponsors the “WSU Field Cam.”

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Shifted Trade Flows: Black Sea Durum Enters the Global Market

World durum supplies were tight early in marketing year 2023/24 as drought in the Middle East and Canada and quality issues in the European Union (EU) decreased durum availability and put upward pressure on global durum prices. However, as the marketing year continued, non-traditional durum exports from Russia and Türkiye began flooding markets with low-priced durum, weighing on global durum values.

The following will evaluate the current world durum situation and provide an initial outlook for marketing year 2024/25.

Tight Situation in Major Exporters and Importers

International Grains Council (IGC) data indicated that global durum production decreased by 10% to 31.4 million metric tons (MMT) in 2023/24, and consumption exceeded production by 2.6 MMT, leading to a tight durum balance sheet. In Canada, the world’s largest exporter, durum production fell 30% to 4.0 MMT due to drought in the primary growing areas, as reported in the Canadian Outlook for Principal Field Crops. In the EU, a drought in Spain reduced output, resulting in total EU production of 7.0 MMT, 7% below the previous year, according to IGC. Simultaneously, harvest rains in Italy compromised durum crop quality. As a result, EU durum imports rose by 26% to 3.4 MMT.

The combined impact of decreased durum availability and the increased import requirements supported world durum prices throughout the final quarter of calendar 2023 and into the early months of 2024. In October 2023, French durum prices hovered at $428/MT, U.S. durum (photo above) at $467/MT, and Canadian durum at $450/MT, as reported by IGC, U.S. Wheat Associates, and AgriCensus.

This bar and line chart indicates the relationships and changes in world durum ending stocks, production and consumption from 2015 through projected data for 2025 from the International Grains Council.

Global durum production decreased by 10% to 31.4 MMT in 2023/24, and consumption exceeded production by 2.6 MMT. Meanwhile, ending stocks sit at their lowest level of the last decade at 4.9 MMT. Source: International Grains Council.

Rise of Non-Traditional Exporters

As major exporters’ balance sheets remained tight, Türkiye shifted from a net durum importer to a major exporter. Turkish durum production rose by 15% to a record 4.3 MMT in 2023/24, on a higher planted area and sufficient growing season moisture.

The combination of favorable prices, above-average production, and export focused domestic support programs prompted the Turkish Grain Board (TMO) to authorize the sale of 150,000 MT of durum on February 1, 2024, at prices quoted below market values. On March 7, TMO offered an additional 150,000 MT of durum but canceled the offer as the quoted prices were too low relative to domestic price levels. Nevertheless, Turkish durum exports were estimated at 1.7 MMT for the year as prices remain ultra-competitive relative to other origins. Meanwhile, Stratégie Grains forecasted Russian durum production at 1.3 MMT, with exports projected at 800,000 MT, a 60% increase on the year.

The influx of low-priced Turkish and Russian durum has eroded world durum prices. As of April 16, French durum prices sit at $375/MT, U.S. near $351/MT, and Canadian at $360/MT, down $53, $116, and $90 from October’s prices, respectively.

This bar chart including data from Strategie Grains compares changes in durum exports in 2024 compared to 2023 for 7 countries.

As major exporters’ balance sheets remained tight, Türkiye shifted from a net durum importer to a major exporter. Turkish durum production rose 15% to a record 4.3 MMT in 2023/24. As a result, Turkish durum exports were projected to reach 1.7 MMT. Source: Stratégie Grains.

Will The Patterns Hold?

IGC forecasts a recovery in world durum production in 2024/25 to 34.6 MMT on favorable weather in Canada, EU, and Türkiye. Current estimates suggest Turkish durum production will remain strong in 2024/25 at 4.5 MMT, while exports may exceed 1.0 MMT. It is unknown if Türkiye will rise as a long-term durum exporter, but balance sheets are comfortable in the immediate future.

This line chart compares the elevator bids for US durum compared to hard red spring wheat from 1/1/22 to 4/1/24 indicating higher prices for durum.

Favorable prices for durum relative to spring wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 16, the average country elevator bid for durum sits at $7.51/bu, a significant spread compared to $6.07/bu for HRS. Source: DTN ProphetX Grain Elevator Bids.

Nevertheless, in the current lower-priced market, U.S. durum remains competitive. U.S. durum exports are up 36% on the year at 504,000 MT on increased imports from Algeria. Moreover, the 2024/25 durum area is forecast to increase by 300,000 acres (121,400 hectares) to surpass 2.0 million acres (809,400 hectares) for the first time since 2018/19. Favorable prices for durum relative to hard red spring (HRS) wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 16, the average country elevator bid for durum sits at $7.51/bu, a significant spread compared to $6.07/bu for HRS.

The U.S. has and always will be a stable producer and exporter of durum. As world markets shift and adjust, the U.S. has remained a constant supplier, providing reliable, high-quality supplies of durum and other wheat classes on which customers worldwide can rely.

By USW Market Analyst Tyllor Ledford

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A Better Start for U.S. Hard Red Winter Wheat Conditions

With U.S. hard red winter (HRW) and hard white (HW) wheat moving into its crucial vegetative state, U.S. Wheat Associates (USW) and its state wheat commission member organizations have started weekly conference calls to share wheat condition reports. Overall, wheat in Central and Southern Plains entered 2024 in better condition than compared to the prior three years. Although recent weather has turned warm, windy, and dry, industry participants remain optimistic for the 2024 crop.

The most recent 2024 USDA Crop Progress report rated 56% of the winter wheat crop in good to excellent condition, up significantly from 27% last year. As of April 8, 6% of winter wheat is headed in the Southern Plains. USDA reported as of April 9, an estimated 18% of all U.S. winter wheat production is within an area experiencing drought.

Latest HRW Wheat Conditions

As usual, Texas leads the way in crop progress with 27% of its HRW and soft red winter wheat headed. At 44% good to excellent, conditions remain encouraging.

In Central Oklahoma, wheat progress continued to benefit from recent rains with 55% at the jointing stage. Good to excellent wheat condition in the state was 68% as of April 7. USW Chair Michael Peters farms northwest of Oklahoma City and reported this week that the condition of his HRW wheat varies from excellent to “just okay.”

Conditions in Kansas are also variable with 49% rated good to excellent. Jason Ochs farms in far western Kansas and recently told Kansas Wheat that it was a nice change to get a good stand right from the start last fall. Yet he also said his topsoil is dry.

“We missed the last three of four moisture chances, so optimism is going down a little bit,” Ochs said. “As of now, it looks like we are going to raise above-average yields. I don’t know how you cannot be a little excited about that.”

Drought has eased for the 2024 U.S. winter wheat crop. On April 18, 2023, 50% of winter wheat production was within an area experiencing drought.

Mixed Bag in Colorado

High winds in eastern Colorado have dried out fields and hurt winter wheat stands.

“Overall things are looking better than they did a year ago at this time,” said Madison Andersen, Colorado Wheat Administrative Committee Director of Communications and Policy. “However, it is a critical time for moisture, especially after the high winds and warm temperatures we have seen the last two weeks.”

In Nebraska, good to excellent winter wheat was at 68% as of April 7, but with the area’s dry and windy conditions, industry representatives say more rain is needed to make the crop. And in Wyoming’s southeastern region, USDA estimates that 91% of the wheat is in fair to good condition. That is up from 63% at the same time in 2023 and from the five-year average for this date of 74% fair to good.

USW will start publishing its 2024 weekly Harvest Reports after the combines start to roll in Texas. Follow the reports, posted every Friday, online here, or sign up here to have Harvest Reports emailed to you.

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New USDA Report Estimates Less Wheat Planting, More Ending Stocks

On March 28, the United States Department of Agriculture (USDA) released its yearly Prospective Plantings and quarterly Grains Stocks reports. The reports provide crucial insights to U.S. wheat importers as we enter the concluding months of the 2023/24 marketing year and look ahead to the 2024 harvest. This article will analyze USDA’s recent reports on wheat planting and stocks and their implications as we look ahead to 2024/25.

Seeding Less

USDA estimates put the total U.S. wheat area at 47.5 million acres (19.2 million hectares), marking a 4% reduction from the previous year.

Breaking down the estimates by class, the area for winter wheat fell by 7% to 34.4 million acres (13.9 million hectares), with Hard Red Winter (HRW) wheat plantings decreasing by 5% on the year, Soft Red Winter (SRW) falling by 15%, and white wheat (winter and spring) decreasing by 2%. Meanwhile, the Hard Red Spring (HRS) area is expected to increase by 2%, while durum may rise by up to 22%.

Bar chart showing seeded area of 5 wheat classes between 15/16 and 24/25.

The 2024 wheat area is forecast at 47.5 million acres (10.2 million hectares), down 4% from 2023 but 500,000 acres (202,350 hectares) higher than the USDA Outlook Forum Estimates. The area consists of 24.3 million acres of HRW (approximately 9.83 million hectares), 6.26 million acres for SRW (about 2.53 million hectares), and 4.2 million acres of white wheat (roughly 1.7 million hectares). The HRS area is projected to reach 10.7 million acres (around 4.33 million hectares), while durum is estimated at 2.0 million acres (approximately 0.81 million hectares). The wheat area is forecast at 47.5 million acres (10.2 million hectares), down 4% from 2023 but 500,000 acres (202,350 hectares) higher than the USDA Outlook Forum Estimates. The area consists of 24.3 million acres of HRW (approximately 9.83 million hectares), 6.26 million acres for SRW (about 2.53 million hectares), and 4.2 million acres of white wheat (roughly 1.7 million hectares). The HRS area is projected to reach 10.7 million acres (around 4.33 million hectares), while durum is estimated at 2.0 million acres (approximately 0.81 million hectares).

When the 2023 U.S. winter wheat crop was seeded in 2022, income potential looked favorable, with prices still elevated by Russia’s invasion of Ukraine. As a result, total seeded wheat area for 2023 was up 8% from the prior year. With current prices falling in line with pre-war trends, and input prices lagging, profit margins have tightened, placing additional pressure on farmers and driving the downward shift in acres. Although the 2024 wheat area is down from last year, the overall area remains 2% higher than the five-year average and represents the second-largest area since the 2018/19 season.

Though the spring wheat and durum is not yet planted, favorable prices for durum relative to spring wheat may incentivize producers to substitute durum acres for HRS, particularly in non-traditional durum growing areas. As of April 3, the average country elevator bid for durum sits at $9.88/bu, a significant jump from an average bid of $5.92 for HRS. The favorable price spreads may push durum area as high as 2.0 million acres (810,000 hectares). If realized this would be the largest durum area since 2018/19.

Crop Competition

Profitability continues to drive crop competition, but an increasing reliance on crop rotations is moderating the impact. Farmers use rotations to reduce price risk and control disease cycles, making them less inclined to make significant acreage adjustments based on price alone.

According to USDA’s estimates, soybean area is anticipated to rise 3% to 86.5 million acres (approximately 34.99 million hectares), aligning with traders’ expectations. Meanwhile, the estimated corn area has decreased 5% to 90.0 million acres (about 36.42 million hectares), falling short of the anticipated 91.7 million acres (226.6 million hectares). However, when considering grain and oilseed acres in the context of all principal field crops, the share of acreage planted with wheat, corn, and soybeans remains relatively stable. Wheat and corn account for 15% and 29% of all acres, consistent with the ten-year average, while the proportion of acres planted with soybeans sits about 1% above the long-term average at 28%.

Line chart shows the number of acres planted to corn, soybeans and wheat annually from 15/16 to 24/25.

The combined area planted with corn, soy, and wheat decreased by 2% to 224 million acres (90.6 million hectares), down from the near-record 228.1 million acres (92.3 million hectares) from the previous year. Even so, the share of acreage planted with corn, soybeans, and wheat remains in line with the five- and ten-year averages. Source: USDA Prospective Planting s Report

Stocks: Up But Still Tight

Also released on March 28, the quarterly USDA Grain Stocks report put total wheat stocks at 29.6 MMT, as of March 1. On-farm stocks were estimated at 7.4 MMT, up 16% from last year, while off-farm stocks came in at 22.2 MMT, up 14% from the year prior. The increased stock levels bolster USDA’s ending stocks estimate of 18.3 MMT, marking an 18% rise from 2023/24 and the first increase since 2015/16. Increased ending stocks helps relieve short term pressure on the U.S. balance sheet.

Moreover, even as planted area is forecast to decrease, the prospects for increased yields and greater wheat production are optimistic as drought conditions improve across the U.S. Southern Plains. The first USDA Crop Progress report of the year indicates that 56% of winter wheat is in good to excellent condition, a significant improvement from 28% at the same time last year. Increased production will help loosen the U.S. balance sheet and diminish supply related price pressures.

Bar chart shows the annual U.S. wheat ending stocks level from 14/15 to 23/24.

On-farm stocks were estimated at 7.4 MMT, up 16% from last year, while off-farm stocks came in at 22.2 MMT, up 14% from last year. The increased stock levels help confirm higher ending stocks for 2023/24. As exports remain lackluster and domestic demand steady, the USDA ending stocks are expected to grow 18% to 18.3 MMT. Source: World Agricultural Supply and Demand Estimates

Nevertheless, underlying tightness remains. U.S. stocks still sit at one of the lowest levels since 2013/14, and with global wheat consumption surpassing production, the global stocks-to-use ratio (excluding China) has dropped to 20%, the lowest point since the 2007/08 season.

More to Come

With a looser balance sheet in the short term tempered by decreased acres, the recent 2024 crop reports provided a mixed sentiment. It is also important to note that USDA’s estimates are based on surveys of U.S. farmers current intensions and may be subject to change as planting ramps up in the coming weeks. With spring wheat planting only 1% completed and winter wheat 4% headed, a definitive statement regarding the 2024 crop is yet to be written.

Moving forward, the May 2024 World Agricultural Supply and Demand Estimates (WASDE) will provide further insights into the 2024/25 marketing year and the July 2024 WASDE will give the initial by-class wheat production estimates. Also, make sure to follow the weekly and monthly reports from USW and USDA on crop conditions, harvest, and production. As always, U.S. Wheat Associates remains committed to offering information and support as we transition into the 2024/25 marketing year.

By USW Market Analyst Tyllor Ledford.

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Wheat Price Perspectives: A Look at Long-Term Trends

Over the last year, world wheat prices have trended steadily lower, continuing their fall from the highs hit in May of 2022 after Russia invaded Ukraine. Ample wheat stocks from Russia and record exports flowing from the Black Sea continue to weigh on global wheat prices.

The average world FOB price has decreased $32/MT from the start of 2024 and is nearly $255/MT less than the May 2022 high, according to AgriCensus price data. Although the war still rages in Ukraine, the war risk premium has eroded in the market, allowing prices to revert to pre-war trends. The following will outline the current price situation and highlight factors to watch as wheat markets align with long-term trends.

This chart shows how export prices for wheat from several suppliers spiked following the start of the Russian invasion of Ukraine but have now returned to long-term trends.

World FOB prices have reverted to pre-war levels, weighed by low-priced exports flowing from the Black Sea. The average world FOB price has decreased $32/MT from the start of 2024 and is close to $255/MT below the May 2022 high. Source: AgriCensus.

A Return to Pre-War Levels

Although there is a sharp contrast between the current downward trend in global wheat markets and the volatility observed over the last year, wheat prices have fallen more in line with long-term trends. Current world FOB prices hover between $200 and $300/MT on average, in line with price levels from 2018 to 2020. Although the spread between origins is still larger than pre-war averages, the spread has narrowed over the last year. According to AgriCensus and U.S. Wheat Associates Price Report data, in Jan. 2023, U.S. soft red winter (SRW) wheat sold for $347.96/MT FOB, while Russian wheat (12.5% on a dry moisture basis) was loaded at $308/MT FOB, a nearly $40/MT spread. Jumping ahead to March 21, 2024, U.S. SRW is quoted at $216.24/MT FOB, while Russian FOB indications sit at $204/MT, down to a $12/MT spread, similar to spreads seen throughout 2019 and 2020.

Factors to Watch

U.S. Wheat Associates (USW) is monitoring several factors at work in the global wheat market. Even before Russia’s invasion in Feb. 2022, global price levels were beginning to rise. Wheat use jumped 5% to a record 787 MMT in 2020/21, exceeding production by 14.0 MMT. The March World Agricultural Supply and Demand Estimates still put the 2023/24 global wheat consumption 11.0 MMT above production, further tightening stocks. Likewise, the stocks-to-use ratio, excluding China, is forecast to tighten to 20% in 2023/24, the lowest since 2007/08, while early estimates from the International Grains Council predict a decrease in global ending stocks to 57.0 MMT in 2024/25.

This bar and line chart shows the relationship between world wheat production and use is on an upward trend from 1999 through 2024.

From 2014/15 to 2017/18, world wheat production exceeded consumption, increasing world ending stocks to a record 297.6 MMT in 2019/20 and a stocks-to-use ratio of 25%. In 2018/19, global wheat consumption began to outpace production, eroding ending stocks and tightening global balance sheets. Source: USDA PSD.

Looking ahead to marketing year 2024/25 and beyond, a continued decline in world-ending stocks and the tightening stock-to-use ratio may have a bullish influence on price trends. However, in the short term, global wheat markets remain well-supplied, and the ongoing flow of wheat from Russia, the Black Sea, and the EU weighs on prices.

This line chart from USDA shows the relationship between crop and input price indexes suggest farmer profit margins are much lower today compared to 2000.

At the 2024 USDA Agricultural Outlook Forum, USDA Chief Economist Seth Meyer indicated that output prices are falling faster than input prices, leading to tighter margins, and reducing profitability for U.S. farmers. Source: USDA Agricultural Outlook Forum.

While decreasing wheat prices benefits importers, the current situation poses unique challenges for U.S. wheat farmers. According to Seth Meyer, USDA Chief Economist, input price trends lag as the output prices fall, resulting in tighter profit margins and reduced sector profitability for wheat and other row crops. Tighter margins put additional pressure on U.S. farmers, and long-term profitability can influence production trends and planting decisions. Nevertheless, U.S. farmers planted wheat before the war and will continue to produce a range of high-quality wheat classes as markets revert to pre-war norms, ensuring a reliable supply of wheat for the world’s importers.

By Tyllor Ledford, USW Market Analyst

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Setting the Stage for the 2024/25 World Wheat Crop

As March begins, world wheat markets look to new information that may provide a glimpse into what the 2024/25 marketing year brings. As northern hemisphere winter wheat crops break dormancy, weather becomes increasingly important. Meanwhile, southern hemisphere farmers shift their focus to spring crops and the winter wheat planting season.

While world crop updates will help provide a snapshot of global wheat production and latest conditions over the next few months, U.S. Wheat Associates (USW) is taking this early look at how the 2024/25 world wheat crop is shaping up.

USDA world map showing the current state of major crops around the world including world wheat.

In March, much of the world wheat crop will enter its vegetative state in the northern hemisphere. Although, it is not as sensitive to heat and temperature stress in this stage, conditions can still influence the crop’s yield potential. Source: USDA Monthly Crop Stage Calendar.

Southern Hemisphere

The southern hemisphere planting program generally begins in April and continues through August, with harvest occurring between October and February, depending on the specific latitude. For marketing year 2023/24, the harvest is complete, with near-final production numbers available for major wheat-producing. Over the last month, Australia and Argentina have benefited from scattered showers and warm weather, boosting yield potential for summer crops, and helping replenish soil moisture for winter wheat planting. Looking ahead, weather analysts predict the potential for a rapid transition from an El Niño weather pattern to a La Niña event between June and August, which will impact weather patterns in the latter half of 2024.

This interactive image shows the predicted transition from an El Nino to La Nina global weather phenomenon that will impact world wheat production.

Climate models anticipate that the El Niño weather event will dissipate between April and June, with potential for a rapid transition into another La Niña weather cycle, influencing the 2024/25 wheat crop in the southern hemisphere. Source: NOAA.

Argentina – The 2023/24 wheat harvest is complete in Argentina, with USDA production estimates at 15.5 MMT, up 3.0 MMT from the previous year. Production is much improved from drought the year prior, though it still sits 12% below the five-year average.

Australia – USDA put Australian wheat production at 25.5 MMT, while the Australian Bureau of Agricultural and Resource Economics (ABARES) estimate was 26.0 MMT for 2023/24. ABARES projected that the 2024/25 harvest may reach upwards of 28.4 MMT due to increased precipitation expected from the transition into a La Niña weather pattern.

Northern Hemisphere

Due to the large geographic area and delineation between winter and spring wheat, northern hemisphere crop calendars vary significantly by region. Winter wheat is generally planted between September and November, while harvest runs from the south to the north from through September. Spring wheat planting typically begins in April and wraps up in June, while harvest can start in July and finish in September. Although the region is geographically diverse, recent weather has been relatively mild across the northern hemisphere; however, winterkill remains a concern in areas with low snow coverage following a cold snap in January.

Canada– The Canadian Grain Commission puts 2024 production at 33.9 MMT. Despite a decrease in acreage from 10.9 million hectares to 10.7 million hectares, the commission expects production to increase on normalized weather and alleviated drought pressure. However, moisture deficits remain in the wheat-producing provinces of Alberta and Saskatchewan. Much of the crop has not yet been planted, but Statistics Canada will release its crop intentions report on March 11.

This map of Canada shows current drought conditions as of Jan. 31, 2024.

Long term moisture deficits persist in some of the wheat producing regions of Alberta and Saskatchewan after the drought in 2023/24, a factor to watch moving into 2024 harvest. Source: Canadian Grain Commission.

United States – For harvest in 2024, USDA forecasts total winter and spring wheat planted area at 47.0 million acres (116.1 million hectares), down from 49.6 million acres (122.5 million hectares) in 2023. The USDA Prospective Plantings Report on March 31 will provide additional insight into U.S. wheat plantings. The USDA Grains and Cereals Outlook put U.S. 2024/25 production at 51.7 MMT. Weather remains generally warm in the U.S. Plains, helping winter wheat transition from dormancy.

EU – The EU planted area sits at a four-year low, down 3% to 23.3 million hectares. Wet fall weather inhibited some farmer’s ability to plant in France, Germany, and Poland. Some private analysts have 2024/25 EU production estimates at 142.3 MMT. The weather has been warm and dry in western Europe, contrasting cool and wet weather in the east.

Russia – Private analysts forecast Russian production at 87.7 MMT for 2024/25, while Russian government analysts put output at upwards of 93.0 MMT. Mild weather and above-average precipitation have prevailed across much of Russia, although a cold snap may have slowed crop development in the Volga region.

Ukraine – Similar to Russia, the weather has been warm, accelerating winter wheat transition from dormancy. Estimates are Ukraine has planted approximately 4.2 million hectares for the 2024 harvest, down from 4.4 million hectares last year.

This map of Europe, North Africa, and western Russia indicates temperatures in February 2024 were generally warmer than normal with effect on world wheat production.

Weather has been warmer than normal throughout Europe, accelerating crop development and aiding in spring fieldwork. Source: JRC MARS.

Today’s recap is only a snapshot of the current world wheat situation, which will change as the 2024/25 crop develops and enters different stages of production. As always, weather will ultimately dictate where final production numbers will land. Until then, buyers can look to U.S. Wheat Associates and its state wheat commission members for up-to-date information on crop conditions, weather, and the global supply and demand situation.

By USW Market Analyst Tyllor Ledford

 

 

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