Market Perspective

Over the last couple of weeks, wheat markets continued their upward trend, supported by strong export sales, particularly to China and Brazil. News of more crop concerns in Argentina, as another cold snap and another reduction in production estimates, sent wheat futures to new four-month highs last Friday. Argentine wheat production is now estimated as low as 8.8 million metric tons versus earlier estimates of 13 million metric tons. This is the main reason why Brazil has been such a large buyer of U.S. wheat this year. Chile has also been a steady buyer of white wheat out of the Pacific Northwest (PNW) this year. Australia’s wheat still looks in good shape, but world prices have been rising enough to support their new-crop sales so far. Harvest down under will start next month.

The recent government shutdown also caused the shutdown of the U.S. Dept. of Agriculture (USDA). Along with farm payments, it also caused the suspension of almost all USDA reports. The latest indication is that the October Crop Report will be combined with the November Crop Report and released on November 8. Export Sales will be out this week for the first time this month. Export inspections, however, have been released each week and continue to show strong shipments. Last week, export shipments came in at 20.6 million bushels (bu) for wheat including 6.6 million bu out of the Gulf to China and 4.4 million to Brazil, as well as 2.5 million bu of white wheat out of the PNW to regular customers. Corn shipments totaled 32.3 million bu and soybean inspections totaled a whopping 59.3 million bu with the majority headed to China. There are still rumors that China did buy 2 million bu of white wheat from the PNW, but there has been no official confirmation yet.

The USDA Crop Progress Report came out this past Monday and showed U.S. corn harvest now 39% complete compared to the five-year average of 53% and last year of 85%. Harvest weather has been favorable, but it takes longer to put a big crop away. Soybean harvest is 63% done vs. the five-year average of 69%. Winter wheat plantings nationwide are at 79%, which equals the five-year average. The winter wheat crop is currently in very good condition, with 65% in good-to-excellent condition, including 68% rated good to excellent in Washington.

In conclusion, the wheat market has separated itself from the feed markets. Strong demand from China and South America continues to supply fundamental support. The markets have moved past the crisis created in Washington, D.C., at least for now. Hopefully more rational heads will prevail this time, and a government shutdown and debt-ceiling crisis will be avoided, since in the end that does not help anyone. White wheat continues to be a follower. Export demand for white wheat remains decent but unspectacular. It would be very nice to see China come in and buy white wheat out of the PNW. It is significantly cheaper than soft red out of the Gulf and better quality to boot. TCK smut has always been the issue holding white wheat back. If the rumors about the sale of white wheat to China are true, that may be the jolt that this market needs. The question is, “when will that happen?”