WESTERN PRODUCER — Bruce Burnett is bullish wheat due to the ongoing war in Ukraine.
There are reports that Ukraine’s farmers will decrease winter wheat planting by 30 to 40 percent, which would be a significant market factor in 2022-23.
“The reduction in the Ukraine crop makes it very difficult for the world to reach the kind of production levels that we saw this year,” the analyst said during MarketFarm’s Oct. 27 Managing Crop Markets in Turbulent Times webinar.
This year’s supplies are tight. The United States Department of Agriculture is forecasting major exporter ending stocks in 2022-23 of 56 million tonnes, down three million tonnes from last year.
MarketsFarm thinks it will be closer to 54 million tonnes, the lowest level since the 2013-14 crop year. Growers should keep a watchful eye on that number as the season progresses.
Many believe the USDA’s Argentina production forecast is too high. It is estimating 17 million tonnes, down from 22.2 million tonnes last year.
The Rosario Grain Exchange’s latest forecast is 13.7 million tonnes.
“That’s good news for us here in North America, especially Canadian sellers,” said Burnett.
It means Canada will face reduced competition into Latin American wheat markets.
The other bit of good news for Canadian growers is that combined U.S. hard red winter wheat and hard red spring wheat ending stocks are forecast at their lowest level since 2008-09 when Minneapolis futures spiked to an astonishing $25 per bushel.
He doubts history will repeat itself, but the trigger that year was concern about the next U.S. wheat crop.
“We do have that in spades again this year,” said Burnett.
It is very dry in western Kansas and western Oklahoma.
“We’ve got to keep a very close eye on that hard red winter wheat crop into next year,” he said.
One other bullish factor to consider is that MarketsFarm believes Statistics Canada has overestimated Canadian wheat production.
The government is forecasting a crop of 28.6 million tonnes. Burnett thinks it is closer to 27.9 million tonnes.
He is forecasting carryout of 5.3 million tonnes, which would be similar to 2020-21. But it could be smaller than that due to strong demand prospects for Canada’s top-quality crop.
Export prospects are also good for Canada’s durum.
North Africa harvested 4.15 million tonnes of durum, which is similar to 2016 levels.
“That is very, very low production and there is certainly going to be a need to push exports into that area,” said Burnett.
Recent tenders from Tunisia and Algeria helped push cash prices to $14 per bu.
He also expects strong sales to the U.S. The USDA cut U.S. durum production to 64 million bu. in September, a 10 million bu. drop from its August estimate.
The USDA moved U.S. imports to 45 million bu. in its latest supply and demand estimate, up five million bu. from 2021-22 levels.
U.S. carryout is forecast to be snug at 25 million bu. The country will only be able to service the Italian market.
MarketsFarm is forecasting a similar downward correction in Canada’s production number. Yield models did not capture the severe stress the crop endured this year.
Statistics Canada is forecasting 6.1 million tonnes. MarketsFarm believes it is 5.25 million tonnes.
That leaves room for a 4.5 million tonne export program if North African demand doesn’t dry up.
Carryout is forecast at 580,000 tonnes, which is very tight once again.
Canadian cash spreads between durum and spring wheat have widened to a $1.71 per bu. premium, up from a discount of three cents per bu. in September.
He doesn’t expect the spread to get much higher than that, but durum could still benefit from any rally in spring wheat prices.
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