Todd's Take

HRW Wheat Winding Down

Wheat prices showed some excitement in late July and early August, but the rally spurred by news of dry weather in Europe did not last long. More recently, prices have congested in a wedge formation as prices slowly head toward a less volatile time of year (DTN ProphetX chart).

I know time flies and early August doesn't seem that long ago when December Kansas City wheat prices were challenging $6.20 a bushel with help from dry weather concerns in Europe. Europe's wheat production did suffer this year, 9% lower according to USDA, and production is also estimated 18% lower in Russia and 13% lower in Australia.

In all, USDA estimates world wheat production will be down 3.7% in 2018-19 to 730.9 million metric tons (mmt) or 26.86 billion bushels (bb), which is still a lot of wheat. However, the big surpluses of the past few years are being trimmed, thanks to 745.6 mmt (27.40 bb) of world use. In 2018-19, USDA expects ending wheat stocks for the top seven exporters to drop 25% to 52.0 mmt or 1.91 bb. Technically, that is the lowest in 11 years but is also close to where supplies were five years ago, in 2013-14 when Kansas City wheat prices traded around $7.00.

Naturally, we would expect some lift in prices after a year like that, and spot K.C. wheat prices are up 20% from where they ended in 2017. More recently in October though, the December contract has held within a narrow, 27-cent range and acts like it's ready to hibernate for the winter.

On Monday afternoon, USDA said 65% of the winter wheat crop was planted, and more progress was likely this week because the rain stayed mostly in Texas. Last week's heavy showers in Kansas and Oklahoma created some flooding problems, but they also contributed to the removal of drought in the region.

At the moment, there are no immediate concerns pushing wheat prices in either direction, but DTN Senior Ag Meteorologist Bryce Anderson has been reporting dry planting conditions for winter wheat in Europe, Russia and Ukraine. Of course, there is a long winter to get through before we'll know anything about crops in the spring, but those dry conditions will be worth monitoring.

The bearish concern for U.S. wheat prices is that in spite of this year's lower ending supplies among the major exporters, U.S. wheat supplies remain high with USDA estimating 956 million bushels (mb) of ending stocks in 2018-19.

That high estimate is based on 1.025 bb of U.S. wheat exports, but the way exports are currently struggling, the U.S. will be lucky to match last year's dismal export total of 901 mb.

While winter wheat planting makes progress here in the U.S., Canada is gathering its spring wheat and Australia's harvest will soon begin. The days are getting shorter in the Northern Hemisphere and a three-month measure of price volatility in wheat is slowly declining, right on schedule.

World wheat supplies are lower than a year ago, but plentiful enough in the U.S. to keep prices contained. Once again for wheat prices, a long, sideways trading range seems likely through winter.

Todd Hultman can be reached at

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