The global outlook for 2020/21 wheat production is raised more than 4 million metric tons this month to 770.4 million on sizable gains for Australia, Canada, and the European Union. Based on production gains that place Canada’s estimated 2020/21 wheat crop at near-record size, Canadian exports are projected to be record-high at 25 million metric tons or 13 percent of global exports.
The U.S. export forecast is maintained at 27 million metric tons, based on the current estimate for exportable supplies, the pace of sales and commitments to date, relative prices, and expectations for sustained demand. Among key competitors, the U.S. is expected to export the second-greatest volume of wheat in the new marketing year, behind only Russia. At 37.5 million metric tons, Russia is forecast to be the leading global wheat exporter.
Domestic Outlook
Domestic Changes at a Glance:
- The 2020/21 U.S. all wheat supply and demand estimates are unchanged from the August projections.
- The all wheat season-average farm price (SAFP) is unchanged from the previous forecast and remains at $4.50 per bushel following mixed and mostly offsetting movements for both cash and futures wheat prices.
- As of the week ending September 6, the winter wheat crop was 100 percent harvested while the spring wheat crop was 82 percent harvested and compares with the 5-year average of 87 percent.
- Aided by largely dry conditions, winter wheat planting for 2021/22 is underway in many key States. As of September 13, 10 percent of intended wheat acres in the 18-State reporting area had been planted and compares with 8 percent the year prior.
- On September 30, USDA, National Agricultural Statistics Service (NASS) will release the 2020 Small Grains Annual and the Grain Stocks report.
- The Small Grains Annual will contain any production revisions for winter, other spring, and durum wheat, as well as wheat-by-class production estimates.
- The Grain Stocks report will provide indications of 2020/21 first quarter wheat disappearance and inform potential updates to quarterly stocks and feed and residual use projections.
2020/21 Harvest Nears Completion, Spring Wheat Lags Behind Average Pace
As of the week ending September 6, 2020, the spring wheat harvest was estimated by USDA, NASS to be 82 percent complete—an advance of 13 points from the prior week and 5 points behind the 5-year average pace of 87 percent. Recent dry weather is aiding harvest progress. An early September cold spell is said to have briefly brought temperatures below zero but is not thought to have harmed the mostly mature spring and durum crops.
According to the North Dakota Wheat Commission, the average protein level for the North Dakota spring wheat crop is 14.6 percent and slightly above average, as of September 9, 2020. The Northern Plains durum harvest progresses with North Dakota reporting 71 percent harvested as compared to the weather-delayed harvest of 2019 which saw just 43 percent harvest at the same week. The September Small Grains Annual report will provide the next update for other spring and durum production.
The 2020/21 winter wheat harvest is complete and Plains Grains, Inc. recently released its final HRW harvest summary of the marketing year. Protein levels were unchanged from the previous week and remain at 11.9 percent, above the 11.3 percent estimated for the 2019/20 crop. While the realized protein level is slightly below the target 12 percent, Plains Grains, Inc. reports that water absorption is “exceptionally good.”
Planting of the 2021/22 winter wheat crop is underway with 10 percent planted as of September 13.In Western Kansas—the heart of the hard red winter wheat production belt, dry conditions persisted through harvest and into field preparation, with drought from the Western U.S. slowly advancing towards the High Plains.
However, recent rains—estimated between a quarter to a half inch—have arrived at the ideal time for wheat planting in Western Kansas. Replenished regional soil moisture levels are expected to aid in the sprouting next year’s dryland wheat crop and temporarily stave off the advancement of drought.
U.S. Wheat Exports Benefit from Recent Purchases by China
This month, the U.S. Bureau of the Census released trade data through the month of July, indicating wheat exports are up nearly 13 million bushels above the 4-year average. The USDA, Foreign Agricultural Service weekly sales reports further indicate that commitments through the end of August have totaled 45 percent of the marketing year forecast, compared with 42 percent the year prior.
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While the Philippines is now the number one export market for U.S. wheat, China has been entering the U.S. marketing with significant recent purchases, helping export sales and commitments to exceed last year’s pace.
U.S. sales have been buoyed by China’s creation of a Tariff Rate Quota (TRQ) for wheat totaling 9.64 million metric tons (354.2 million bushels). This TRQ is not required to be filled with purchases of U.S. wheat, however, calendar year-to-date, China commitments to purchase U.S. wheat have totaled 1.47 million metric tons, second only behind the Philippines. In the 2020/21 marketing year, despite U.S. wheat often not being the most price-competitive, China has continued to make significant purchases.
On July 10, China purchased 190,000 metric tons of HRS and 130,000 metric tons of HRW followed by smaller purchases by Chinese Taipei towards the end of both July (98,200 metric tons) and August (net nearly 100,000 metric tons).
U.S. Wheat Holds Steady on Mixed Price Movements
Weather reports for both the U.S. and other key exporting nations appears to have contributed to mixed export and futures price movements in August and through mid-September. Continued dryness in the European Union and Argentina provided some price support; however, notions of larger crops for Canada, Australia, and possibly Russia, inhibited much upward price movement.
Further, cash price movements across the three main classes of wheat have largely been offsetting—providing little support for an upward or downward adjustment. On net, price movements for the previous four weeks have largely been neutral. Accordingly, the season-average farm price (SAFP) is unchanged this month and remains at $4.50 per bushel and compares with the $4.58 per bushel that farmers received for their 2019/20 wheat crop.
