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| Modest increase expected in U.S. winter wheat acreage |
The U.S. Department of Agriculture was to release its annual winter wheat seeding report along with its monthly supply and demand report on Jan. 11 but did not because of the partial government shutdown.
Reuters polled the grain trade for its estimates of what U.S. farmers seeded in the fall and came up with an average of 32.3 million acres, up one million from last year’s trade guess of 31.3 million.
The final actual seeded area in 2018 was 32.5 million acres, of which 24.7 million acres were harvested, producing a crop of 1.18 billion bushels.
That is a lot less area than in the past. The seeded area in the first half of this decade was around 40 to 42 million acres, but as the years passed and soybeans and corn provided better returns, wheat plantings suffered.
If farmers did indeed add a million seeded acres of winter wheat, it would be the first annual increase since 2013.
The overall amount of wheat produced in the U.S. in 2018 was up slightly from the year before because northern farmers increased their area of spring wheat and the yield on that crop was a bit better than the trend line.
The USDA forecast in December that stocks of all wheat by the end of the 2018-19 crop year would be 974 million bu., down from about 1.099 billion the year before and a similar amount two years ago.
It is good that U.S. stocks are shrinking but they are still not considered tight. American wheat exports this year are disappointing and that is contributing to the slow drawdown of stocks.
Globally, the wheat story is a little more bullish.
Russia did not produce a gigantic crop as it did two years ago. Some reports say much of the wheat in its usual exporting area close to Black Sea ports is already spoken for and prices there are edging higher.On the other hand, Russia was the low bidder last week, winning an Egyptian tender for 415,000 tonnes, showing it is not out of wheat yet.
If Russian shipments do slow, it raises the potential for other exporters, including the U.S. and the European Union to get more business.
Australia had a small crop, so it is not a big factor this year.
Canadian wheat exports have been going gangbusters all through this crop year.
As of Jan. 6, Canadian wheat shipments stood at almost 8.2 million tonnes, up 1.46 million tonnes, or 22 percent, from last year at the same point and up 19 percent over the five-year 2014-18 average.
The big buyers so far have been Indonesia, Peru, China, Japan and Colombia, according to the Canadian Grain Commission’s latest monthly report to the end of November.
If the very strong pace continues, the year-end wheat stocks could fall even below the current forecast of 4.2 million tonnes.
If ending stocks declined to four million tonnes, it would be similar to the tight years of 2015-16 and 2012-13.
That should narrow the basis in farmers’ favour.
But price increases on the Minneapolis futures exchange for the rest of the winter will likely depend on whether the U.S. starts making more sales. We will learn of those sales only when the U.S. government is fully operating again and the weekly USDA export sales report is resumed.
Prices from March onward will start to be influenced by weather as winter-seeded crops start to come out of dormancy.
Currently, the U.S. winter wheat crop is benefiting from good moisture. The Drought Monitor map at droughtmonitor.unl.edu shows no level of drought in the southern Plains and Midwest.
The forecast out to the end of March is for adequate moisture to continue, setting up U.S. winter crops for good yield potential.
Another factor will be farmers’ spring seeding plans and the relative strength of oilseed and corn markets.
The recent thaw in U.S.-China trade relations might lead to new agreements and an end to China’s tariff on American soybeans.
But if the tariff remains, the attraction of seeding soybeans will wane and U.S. farmers will turn to corn and spring wheat and that would act against wheat prices.
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