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WMR-Slow harvest for U.S. hard RED SPRING wheat

Posted: Sep 24 2019

The 2019 harvest for U.S. HRS wheat has been quite challenging, with a cool August followed by an extremely wet September.  As of mid-September, nearly 30 percent of the U.S. crop was yet to be harvested, and some parts of Montana and North Dakota were less than one-half completed.  Quality has been impacted, but the level of impact varies by region, and the depth is still uncertain due to the late harvest.

Quality reports are showing above average protein and good test weights, but lower than average falling numbers on a broad portion of the crop, and low vitreous kernel counts.  Isolated areas are also struggling with elevated DON levels.  Discounts for wheat which falls below contract specifications for quality are significant, as low end wheat is pushed into feed channels.  Premiums for quality are non-significant due to historically weak basis values and low futures prices.  As the year progresses, basis and cash levels for quality will need to strengthen to encourage the movement of higher quality milling wheat, either from 2018 carryover stocks, or 2019 production.  

Inventories of hard red spring wheat began the year at 265 million bushels, up 40 percent from the previous year. Much of those inventories boost high protein, high grades and sound kernels, a supportive factor in allowing us to meet domestic and international quality needs.  Customers will need to pursue those supplies with stronger bids.

The most recent USDA production forecast, pegs the average yield at a record of 49.2 bushels per acre, up nearly 2 bushel per acre from 2018.  Producer reports indicate a strong yielding crop in most areas, although yields trended below expectations across eastern areas.  Forecasted production is 566 million bushels, lower than 2018 as planted acres fell by nearly 1 million.  

USDA is currently projecting overall demand similar to a year ago, but both domestic use and exports should work higher.  Domestic use will be supported by higher domestic mill demand with a lower protein HRW crop which is also a bit weaker in some functional performance, and higher feed use of the low end HRS wheat.  Export demand should increase in future USDA projections, as current sales are running stronger than projections.  In addition, Canada, will have a greater challenge in competing for international markets compared to 2018.  A very late harvest, and adverse weather is leading to a lot of uncertainty on final grades and protein levels.  This will limit sales early, and may shift their customer base. 
The 2019 HRS harvest has certainly added a lot of uncertainty to marketing for both producers and grain handlers.  World, U.S. and local wheat supplies remain burdensome, but quality impacts and the slow harvest have tightened premium segments of the market. It may take some time for clearer market trends to develop, as customers review contract specifications and available quality, and producers assess their 2019 quality and price objectives. 

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