Despite persistent problems for the wheat crops in Canada, Europe, Russia, and the United States, wheat prices on the Chicago Board of Trade fell to their lowest levels in three months Thursday, with the July contract trading near $6.64/ bu. Prices for spring wheat in Minneapolis near $9/bu. remain well above the Chicago price, but are also down sharply from two weeks ago.
“Our highs are in on wheat,” says Peter Georgantones, analyst with Abbott Futures in Minneapolis. “The bottom line is the world has wheat and people are going to feed it in place of corn.”
North American wheat production lower
High-quality milling wheat continues to be scarce, though, and planting concerns in the northern plains’ hard red spring wheat belt persist. “The spring wheat belt is a nightmare,” Georgantones says. Late planting and flooding continue to be a concern in the Dakotas, Minnesota, and parts of Montana.
Offsetting problems in the northern tier of the country are higher-than-expected protein levels in the hard red winter wheat now being harvested in Kansas and Oklahoma, which is shifting some of the buying from hard spring wheat to hard red winter wheat.
“The Kansas crop is coming in at an average of 12.5 percent to 13 percent protein,” says Justin Gilpin, CEO of Kansas Wheat in Manhattan, Kan. “Even though the yields are lower than average, we are seeing above-average quality and protein.”
Despite a bump in quality, hard red winter wheat production in Kansas is projected to be sharply lower than last year. USDA estimates that with an average below-trend yield of 34 bushels per acre, total output will be 261 million bushels, down 100 million bushels from a year ago. Oklahoma and Texas have also seen sharp drops in production due to the region’s severe drought conditions.
Earlier this week, the Canadian Wheat Board (CWB) said relentless rain across Canada’s prairie provinces could leave between 6 million and 8 million acres of wheat unplanted, making this year’s crop prospects in western Canada dismal for the second year running. Last year, 10 million acres went unplanted.
Canada’s wheat crop, estimated at 20.3 million metric tons, is expected to be the second smallest in 30 years. Last year’s crop was smaller. Due to late planting, crop development is also way behind normal, which has sparked concerns over the short growing season.
Bruce Burnett, director of weather and market analysis, said this week at CWB’s annual grain industry briefing: “Many farmers in the wettest areas have planted next to nothing this spring, while others are watching their newly emerged crops drown. This is occurring at a time when grain prices are extremely high, adding insult to injury.”
The opposite extreme—severe drought—has affected the wheat crop in Europe, but recent beneficial rains and forecasts for more rainfall over England, northern France, and parts of Germany have increased expectations that the European wheat crop will stop deteriorating.
Wheat production in Ukraine and Russia is expected to rebound substantially from last year’s drought-reduced crops, but more rain is needed, according to reports from Agritel, a Paris-based consultancy firm. If further beneficial rains materialize, Russia’s wheat harvest could rebound by 29 percent to 53.4 million tons, according to Agritel. Likewise, Ukraine’s harvest could increase to 18.7 million metric tons, up 1.3 percent from the previous year.
India’s wheat crop is headed for a record, which could spur the Indian government to eliminate its four-year ban on wheat exports. “India has 5 million tons of wheat waiting to be exported,” notes Georgantones.
Early projections for Australia’s wheat crop are also improving. The Australian Bureau of Agricultural and Resource Economics and Sciences this week released a forecast that put the country’s 2011-12 wheat production at 26.2 million metric tons, a 7.8 percent increase from the previous forecast and in line with last year’s harvest. However, experts caution that in recent years, Australia has had to revise early production projections lower due to adverse growing conditions.