Cash wheat markets were dead today as traders focused on logistics for the long weekend & the shock of the USDA stocks & acreage report. They’re also busy with month end, end of quarter & some end of year reports & M2M.
We spent the day working on the report & the impact on balance sheets. The increased other spring wheat acres mark the end of the spring wheat premium to winter wheats, if growers end up planting those intentions. The spring wheat b/s could increase c/o by 100+ mbu next year & I’ve heard one analyst with HRW & HRS c/o the same next year. The rally in world wheat prices has winter wheats starting to price themselves more competitive & given the value of Argentine wheat northern Brazil millers should start asking for values of HRW, for which they’ll pay some premium for blending. Look at the prices paid by Egypt’s GASC in today’s tender, $220/mt fob equal $233-$235/mt c&f. This was a total shock to see them buy 355 kmt for April 28-May 8 shipment, which is right in the middle of their own wheat harvest. We have been increasing US exports as the spread to other origins has narrowed, & today we would put Morocco back into the HRW b/s with their 400-600 kmt preferential duty tender which they must do each year for November – March positions. We’d also be cutting some of the Black Sea exports into LAM in the 18/19 b/s, where our estimate is 500+ mmt greater this past year when prices were at their peak.
The cut in Corn acreage intentions requires the spring planting weather and summer weather to be perfect. It also suggests we should look forward to a wild spring and summer market with very little downside in prices until crops are closer to the bin. This will also support wheat and suggests wheat feeding is a possibility in the USA & world feed wheat demand will continue to support prices at $200+/mt fob. Bottom-line, USDA’s report will result in exciting markets going into the spring-summer. US wheat and world wheat will be supported by corn, which is priced $190-$200/mt before any summer risk premium.
USDA March Prospective Planting and March-1 Stocks Highlights
Winter wheat and spring wheat planted acres were higher than trade estimates raising total all-wheat acres to 47.34 million acres, up 3% from a year ago. Prospective planted acres for soybeans were below market estimates at 88.98 million acres. This will be the lowered planted acres in Indiana, Kentucky, N. Dakota, Pennsylvania, and Wisconsin on record. Corn prospective acres of 88 million acres is down 2% from a year ago and if realized will be the lowest planted acreage since 2015.
Wheat stocks of 1.494 bbu was down 10% from a year ago and inline with trade estimates. Corn stocks totaled 8.89 bbu, up 3% from a year ago and above trade estimates. Soybean stocks were on the high side of trade estimates at 2.107 bbu, up 21% from a year ago.
CCC March-1 By Class Stocks estimates are HRW 740 mbu, HRS 305 mbu, SRW 260 mbu, white 140 mbu, and durum 49 mbu.