While Chicago wheat futures trended lower, spring wheat contracts on the Minneapolis Grain Exchange rose sharply this past week on concerns about the supply of higher quality, high protein wheat.
The September contract closed on Friday at US$5.87/bu — the highest it’s been since the middle of June 2016.
There are three primary factors, explains Neil Townsend, senior analyst with FarmLink Marketing Solutions, in the interview below:
- The hard red winter (HRW) wheat crop in the U.S. has been plagued by adverse weather conditions. Only about half of it is rated as good/excellent, and it’s smallest acreage in many, many years, he notes. Early harvest results in Texas and Oklahoma support lower protein and gluten strength expectations.
- The main spring wheat areas of the U.S. are dry and showed up on the U.S. Drought Monitor this week. Dryness also extends north into southern Canadian prairies.
- Wet conditions continue to hamper seeding progress in the northern tier of the Canadian prairies, with some reports that as many as 3 million acres will go unseeded. Townsend says FarmLink is estimating it will be less than 1.5 million, of which five to six hundred thousand acres would have been spring wheat.
While reports of low protein in the early U.S. HRW harvest might suggest a premium for protein (and provide a signal to topdress nitrogen to boost protein), the dryness in the spring wheat area would favour a higher protein crop, he notes.
Protein aside, the market will be looking for low disease levels — 1 or 2 CWRS with very low vomitoxin.
“That’s where the supply is considered to be relatively tight coming into the year, and there will be a premium over other types of wheat,” he says.
Townsend joined us on RealAg Radio on Friday to discuss how the wheat market is shaping up in North America and beyond: