Milling & Baking News - April 21, 2020 - 22

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Ingredient Market Insight

After demand-driven spike in March,
wheat futures lock into fundamentals
Continued from Page 1

March low near 356,500," he said. "The
recent rally was linked in part to dry European Union and Russia weather."
Wheat futures opened the second quarter with a dip attributed to market participants eyeing a winter wheat crop in good
shape approaching the growing season and
on the cusp of coming out of dormancy. The
US Department of Agriculture, in its first
national crop progress report of the year
April 7, rated the winter wheat crop in the
18 principal production states at 62% good
to excellent. That was the highest good-toexcellent rating in the season-opening condition report in the past 10 years.
As April unfolded, futures found support from export limits set by Black Sea
competitors, including Russia, Ukraine
and Romania. Russia announced it would
reduce export quotas in April-June to 7
million tonnes, down 3 million to 4 million tonnes from normal, Mr. Freed said.
"Those countries don't want to end up
between now and the harvest with tight
stocks and rising domestic wheat prices
or flour prices, so they've taken some
steps," Mr. Meyers said. "That will change
when they get into their winter wheat harvest in June or July, at which time I don't
think there will be any restrictions."
A cold snap gripped the Great Plains
down into the southern Plains in the second week of April. That generated industry chatter about potential frost damage.
But even initial signs, such as burning
back the plants' leaves, don't necessarily indicate lasting damage. By the time a
true sense of the extent of damage, if any,
is known, wheat markets likely will have
moved to other pushers and pullers.
The impact that COVID-19 has had on
gasoline consumption in the United States
has depressed demand for ethanol and
22 / April 21, 2020

Milling & Baking News

biodiesel, which cannot but exert a downward tug on wheat, Mr. Meyers said.
Wheat market participants were watching the northern Plains for signs of planting delays or other factors that could shift
seeding to crops other than hard red spring
wheat, including durum.
The USDA said US farmers this spring
intend to plant 12.6 million acres to otherspring wheat, down 1% from a year ago.
That was in line with Mr. Meyers' forecast, but "if spring wheat planting is lower than intentions in the United States, I

July wheat futures price
per bus
$6.00

Minneapolis

$5.50
$5.00
Chicago

$4.50
$4.00

Kansas City
$3.50

May
2019

July

Sept. Nov.

Jan. March
2020

think it will be because 200,000 to 300,000
acres will be shifted to durum, primarily
in North Dakota," he said.
"Hard red spring prices are about what
they were a year ago, but durum prices
are more than $1 a bu higher than last
year," Mr. Meyers said. "Durum supplies
are going to be tight this year in the United States. It was a puzzle to me as to why
producers were going to plant less durum" as indicated in the USDA forecast.
"Even before the coronavirus, pretty
much from last summer when the durum
crop turned out to be small, durum prices

have been strong," Mr. Meyers said.
Since March, the durum supply has tightened considerably because of a coronavirusdriven spike in retail demand for pasta.
Both Mr. Meyers and Mr. Freed observed that the pace of spring wheat planting could be slow, especially in the waterlogged eastern part of the hard red spring
wheat region. A survey of North Dakota
producers indicated the average start date
for fieldwork in the state was April 30.
Spring wheat planting progress thus
far in the six principal production states
was 5% by April 13, ahead of 2% a year
earlier and compared with 9% as the
2015-19 average for the date. Seeding has
yet to commence in North Dakota (3% as
the five-year average for the date) where
about 17% of the 2019 corn crop remained
in fields by April 12, the USDA said.
Many market participants expressed
disappointment China had not purchased
more US farm products, including wheat.
While recent hard red winter wheat purchases by China were supportive, the
market had anticipated that by now they
would have imported far more in following the phase one trade agreement. That
deal specified China would buy an average of $40 billion in US agricultural products in each of the next two years. But in
January-March 2020, China's purchases
of US agricultural imports were just more
than $5 billion for an annualized rate of
$20 billion, Mr. Meyers pointed out.
"You could argue they didn't really
start until the deal was completed Feb. 15,
but to me it indicated they really haven't
stepped up to the plate to honor the
agreement," Mr. Meyers said. "The idea
that they're going to be a major buyer just
hasn't been the case. It might be partly
the coronavirus there. I am sure they're
going to use that, but I was never a strong
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Milling & Baking News - April 21, 2020

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