Milling & Baking News - August 24, 2021 - 21

Meyers, vice president, commodity analysis,
Foresight Commodity Services. " They
surprised it the other way in August.
What they saw last month was a crop that
had been hurt substantially. There have
been a few times in drought years when
the USDA, rather than reflect damage
over a couple months, went aggressive
early, and it looks like that's what they
did here. Also, when they surveyed for
August, there was nothing harvested
there, so we don't have that information to
sort of true up the numbers. "
The USDA's Sept. 30 Small Grains summary
was expected to include harvest
data that will be used to calculate the final
estimate of the crop.
Wheat futures' latest upward tear
on Aug. 12-13 also was supported by the
USDA's forecast for lower domestic and
global wheat carryouts. The carryover of
US wheat on June 1, 2022, was forecast at
627 million bus, down 38 million bus from
the July projection and down 217 million
bus, or 26%, from 844 million bus in 2021.
World wheat ending stocks in 2021-22
were pegged at 279.06 million tonnes,
down 12.62 million tonnes from July and
down 9.77 million tonnes, or 3%, from
288.83 million tonnes in 2020-21.
The lower global ending stocks forecast
was partly due to lower production estimates
for major US wheat competitors,
Canada and Russia. The USDA forecast the
2021 Canadian crop at 24 million tonnes,
down 7.5 million from the July projection.
The Russian crop was forecast at 72.5
million tonnes, down 12.5 million tonnes
from the July outlook. Those reductions
more than offset an Australian crop that
was forecast at 30 million tonnes, up 1.5
million tonnes from July.
" Going into the reports we heard flour
people talk about how the crop is smaller,
but had good quality, and that it will bake
well, " said Steve Freed, vice president of
research, ADM Investor Services. " But
millers will have to change blends, using
a little more hard red winter wheat, so
that's offering some strong resistance in
the marketplace as far as hard red spring
prices are concerned. The market has to
decide what is the value of wheat based on
the lower Russian crop, lower Canadian
crop, overall lower US crop. We probably
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won't get much export demand because
of where our prices are compared with
Europe and the Black Sea. But it's still
tight, and private estimates of our carryout
are somewhere around 75 million
fewer bus than what the USDA is using,
mostly because imports to the United
States might be lower than what the USDA
is forecasting.
" Some of the buyers are in sticker shock
as far as where prices could go. We just
have to figure out whether some countries'
revenues are down due to COVID
in places such as North Africa, and how
much wheat they can buy at these higher
prices. The corn market is now taking
away from feed wheat here in the United
States and globally. That might add a few
even at 40¢ to 50¢, a correction would be
only 6% to 7% from the highs. Funds still
seem to be reluctant to liquidate very
much.
" We could get Minneapolis December
falling under $9, maybe even to $8.80. Part
of that is we rocketed higher without any
kind of correction, and with these high
prices, we might see more harvest selling
than normal, which might back it off
some. Going forward into the first quarter,
most of the time we'll be looking at
$9 to $9.40 a bu for spring wheat futures
because of the combination of small crops
in the United States and Canada. Two of
the major spring wheat producers have
had disastrous crops, so prices will stay
supported because of that. There'll be
US WHEAT CARRYOVER
306
657
976
2008 2009 2010
863
2011
Source: US Department of Agriculture
743
2012
718
2013
590
2014
752
2015
976
2016
1,181
2017
1,099 1,080 1,028
2018
2019 2020
844 627*
2021
*forecast
2022
wheat bushels to the bottom line, not
milling bushels, but total bushels. Globally,
we've had a rally in French MATIF
futures, and all they may continue to set
higher highs, which the US futures are
tending to follow. "
In the near term, wheat futures may see
a correction, if history is a guide.
" We could see KC wheat down around
$7.10 to $7.15, and Chicago down around
$7.25 to $7.30, partly reflecting profit-taking
because the market has been going
up so strongly in the last month or so, "
Mr. Meyers said. " The USDA reflected
a little bit that these high prices may
reduce consumption somewhat. But we
don't get a lot of reduction in consumption
because of higher prices on wheat.
Flour is a staple in a lot of countries.
Markets that go straight up like this tend
to have at least a modest correction. And
some substitution where users can. But,
in addition to a potential 120-million-bu
decline in the carryover of spring wheat,
the hard red winter wheat carryover is 80
million bus below a year ago. "
Mr. Freed saw even more upside potential
for Minneapolis first-quarter futures.
" In the December-February time frame,
which is the March contract, we would not
rule out $8 Chicago and Kansas City wheat
prices, which might put Minneapolis at
$10, " Mr. Freed said. " A lot of it has to do
with what the price of corn is, and where
will soybeans be? Everything is kind
of linked together now after the USDA
reports. We'll closely watch the September
report. The market was surprised that
the farmer wasn't more optimistic about
corn and soybean yields. If August is dry
like it was last year, we probably won't see
the kind of increase that the market needs
MILLING & BAKING NEWS 21
million bus
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Milling & Baking News - August 24, 2021

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