Milling & Baking News - November 19, 2019 - 24

Ingredient Market Insight

as the planted area in 2020 in my calculations," Mr. Meyers said.
He indicated he expected hard red
winter wheat acreage to be down
about 500,000 acres from 2019 and
soft red winter wheat acreage to be up
about 600,000 acres. He expected little
change in hard other-spring wheat
acreage. Comparative pricing argued
for more soybean and corn acres and
less acres for wheat.
"I think everyone is on the same page
on this," Mr. Freed said. "I think the big
picture consideration is that if nothing
really changes in other exporting countries, we really don't need 45 million
acres, especially as we note gradually
escalating yields of today's wheat."
Mr. Harris said, "If wheat prices
are going to stay about where they

private estimates are well below
the U.S.D.A.'s projections for those
wheat exporting nations.
Mr. Freed said many analysts suggested a trading range in nearby Chicago wheat futures from $4.70 to $5.20
a bu. He added, "Because of the quality
of the hard wheat crop, wheat futures
likely will have to follow the corn market." Mr. Freed acknowledged there's
a lot of uncertainty about 2020, but
"would you buy K.C. wheat below $4?
Definitely. But it doesn't spend much
time below $4. Would you buy $4.40
in July 2020? Probably not. It could go
lower from there."
Mr. Harris commented, "I think
we're in a range here. Using the March
K.C. future as a proxy, I think you're
going to find good support above $4

March soybean futures price

per bu
$10.00

$9.40

$8.80

$8.20
Jan.
2019

Feb.

March

April

May

are, and you have to believe we're not
going to extend Market Facilitation
Program payments (government subsidies to farmers to offset lost export
demand because of trade disputes)
forever, you are going to see more producers moving away from wheat. So, I
definitely think that this year and next
may easily be back-to-back record low
acreage for wheat."
Analysts see wheat futures trading
largely rangebound in the next few
months.
Mr. Meyers noted the K.C. March
future, currently trading at about $4.38
a bu, may decline to $4.10 or $4.15 in
the next three months or so. He suggested the Chicago March may decline
to around $4.90 to $4.95, and the Minneapolis March may decline to around
$5.15 to $5.20.
"The main reasons are I think export
demand for U.S. wheat will remain
sluggish, and we could see weaker
corn and soybean prices," he said.
"Also, we're still looking at record
world wheat production this year."
Mr. Meyers said what might drive
futures higher would be even lower forecasts for the Argentine and
Australian crops, noting that some
24 / November 19, 2019

Milling & Baking News

June

July

Aug.

Sept.

Oct.

Nov.

through the dormancy period of winter wheat. I think wheat futures over
the next several months will be tied to
whatever corn does."
He provided the caveat that should
the value of the dollar crater, wheat futures may rally.
Mr. Freed said his advice to end users was, No. 1, pray for better wheat
quality in 2020. He added if bakers
can make profits with K.C. wheat
close to $4 a bu and Chicago wheat
close to $5, they should get coverage.
He acknowledged they won't want to
overbuy in advance of knowing their
needs. The challenge will be getting
through a tough year.
2019-20 corn outlook
The U.S.D.A. forecast the carryover
of corn on Sept. 1, 2020, at 1,910 million bus, down 19 million bus from the
October outlook and down 4% from
2,114 million bus in 2019. While the
U.S.D.A. lopped off 118 million bus
from its 2019 production forecast, it
trimmed forecasts for 2019-20 corn use
for ethanol production by 25 million
bus, to 5,375 million, and for exports
by 50 million bus, to 1,850 million.
Mr. Meyers thinks the U.S.D.A. may

be too high on its total corn use forecast, at 13,915 million bus, which may
be 175 million bus too high.
"I think their export number may
be about 100 million bus too high, and
I think their ethanol usage forecast
is about 50 million bus too high," he
said. "I think a lot of people thought
export demand would be better because South America shouldn't have
much to sell at this time of year. But
Brazil is still exporting, and the U.S.
corn export pace is running well behind what the U.S.D.A. has forecast...
It's the demand side of corn that may
hold prices down."
Mr. Freed added, "Washington
still doesn't have an ethanol policy,
especially on waivers, which hurts
demand."
Mr. Harris said several ethanol
plants have been forced to shut
down, "and from the export perspective, we've just not been able to get
much of anything. Thank goodness
for Mexico, or we'd be storing the
stuff on the ground."
With regard to direction of corn futures, Mr. Freed said, "We're pretty
close to where people thought support would be at $3.70 a bu. There
really isn't a need, especially as the
harvest winds down, to trade much
lower, especially when we speak of
basis levels at some locations being
as much as 40c above normal. Getting
over $4 is going to be tough."
Mr. Meyers said, "I think March
corn at $3.85 today may go down to
$3.65 to $3.70." He said that with the
export picture so weak, without a major turnaround, prices will continue to
struggle."
Mr. Harris said corn futures must
hold well above $3.50 a bu, especially
if a goal is to encourage farmers to
plant more corn acres in the spring.
"For the market to really take off,
we would have to have a major shift
in exports," he said.
2019-20 soybean outlook
The U.S.D.A. forecast the carryover
of soybeans on Sept. 1, 2020, at 475
million bus, up 15 million bus from the
October projection but down 438 million bus, or 48%, from 913 million bus
in 2019. The only adjustment in the
2019-20 soybean supply-and-demand
balance sheet was a 15-million-bu decline in the forecast for the soybean
crush to 2,105 million bus. The soybean export forecast was unchanged
at 1,775 million bus.
"The crush margin has just gone
to hell in a handbasket," Mr. Harris
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Milling & Baking News - November 19, 2019

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