US Exports are Lagging, but Black Sea Crop Determines Prices.
Market Analysis
With the annual Kansas wheat crop tour being canceled because of the coronavirus pandemic and a cold spell plunging deep into the S. Plains last month, the trade has been struggling to assess the size of the 2020 US winter wheat crop. Agronomists have observed field damage from West Kansas into Oklahoma and the Texas Panhandle, but patchy dryness and hot temperatures may have also impacted the size of 2020’s hard red wheat crop. Nationally, the USDA’s G/E winter wheat ratings slid from 62% to 54% before a 1% rebound this week. Given these conditions, we are expecting this year’s US hard red crop to be down from 833 million to 740 million bu. because of a drop from the second best average yield ever and a smaller planting. 2020’s soft red wheat crop is expected to rise to 260 million bu. because of 440,000 larger seeding, while the PNW’s white wheat crop will likely be unchanged at 235 million bu this year. Overall, a 1.235 billion US winter wheat crop is being expected, down from a 1.304 billion bu level in 2019.
The USDA will also issue their 1st 2020/21 world wheat supply/demand data on May 12. Currently, prospects appear mixed. Sporadic weather and reduced seedings has the Black Sea, Europe and the US with lower outputs while Canada, Australia and Argentina are likely to have larger crops within the major world exporters. Overall, a slightly higher world crop of 767 mmt is possible with 2020/21’s ending stock increasing to 300 mmt because of demand falling behind world output for the 7th year out of 8.
Looking at wheat’s upcoming old-crop balance sheet, unshipped exports with 1 month left in the crop year are at their highest level in our 30 year database. This suggests US wheat exports could be reduced by 20-30 million bu. this month. Feed and food usage levels don’t usually change this month so wheat’s old-crop stocks may rise to 990 million bu. Interestingly, 2020/21 US wheat stocks could drop if our spring wheat output remains stable.
What’s Ahead
US wheat stocks could tighten in the coming year because of a smaller US winter wheat crop. However, the size of the crops and political decisions of the Russia & Ukraine will be major price factors going forward. Reports of labor issues & field reports from 2020 US harvest will be watched closely.
Use rallies to bring 2020 sales to 33% for both the July Chi & KC wheat at $5.45-$5.60 and $4.95-$5.10 ranges.
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