Slowing US Exports Leaves Highest 4th Qtr. Shipments Since 2011

Market Analysis

The wheat market’s focus will be split between the upcoming quarterly stocks & the US producers’ prospective planting survey since both USDA reports will be released on March 31. Wheat’s March 1 stocks report is important to see if this crop’s demand trends for exports, feed, and food have remained on target as this foodgrain enters its final quarter of 2020/21 crop year. After last fall’s substantial jump of 1.58 million acre jump in US winter wheat plantings, we and many in the trade are expecting current strong corn bean prices to modestly decrease the N. Plains durum & spring wheat seedings. (see March 18 report).

Crop problems in Europe and Ukraine last summer rallied wheat’s world prices & advanced US export & shipments. Wheat’s first-quarter US exports were 270 million bu., the highest in 3 years. However, bountiful Canadian & Australian crops have added competition to the world trade since last fall. This has slowed US shipments, particularly this past Dec-Feb quarter when exports were only 205 million bu. Competition for elevation slots because of China’s aggressive US soybean export program maybe a reason for this pace, but wheat now has a daunting task. The US needs to ship about 250 million bu in the final 10 weeks of the crop year to hit this USDA’s forecast. This is the highest spring shipment requirement since 2011.

To measure US wheat feeding, the trade compares exports, food usage, and seed utilization vs the USDA’s quarterly stocks (similar to corn) to determine if wheat’s feed demand is matching expectations. US wheat’s highest unexplained disappearance occurs on its September 1 report when exports are in transit & many times US spring wheat bushels remain in the fields. This level normally falls through the balance of the year. Given wheat’s price premium to corn this year, US wheat feeding maybe vulnerable to a lower final USDA feed demand than the current 125 million final feed level. Because of this factor & slowing exports, 1.285 billion bu March 1 US wheat stocks is expected, but it is still the lowest stock level since 2015.

What’s Ahead:

The trade’s focus will switch to the US Plains & the Black Sea growing conditions after Mar 31. With recent rains improving the US winter wheat prospects and the Black Seas having reduced winter kill reports, smaller US & Canadian spring wheat seedings are needed to sustain a big rally. Utilize strength to market the final 10% Chi/KC old-crop at $6.48-$6.55 & $5.92-$6.00, but hold new-crop sales at 20-25%.