Wheat Markets Focus on Quality and Southern Hemisphere Crop Conditions

    With harvest finished in most Northern Hemisphere countries, all eyes are turning toward crop quality reports for wheat from those countries and crop development in Australia and Argentina – the largest Southern Hemisphere wheat exporters.

    Quality Reports

    United States: The annual USW Crop Quality booklet is now available in English, Spanish and French on the website on the Crop Quality page in the Market & Crop Information menu. USW also featured by-class quality updates in Wheat Letter, including the hard red spring (HRS) , soft red winter (SRW) , and summaries for hard red winter (HRW), soft white (SW) and northern durum in this issue.

    Canada: In its October “Principle Field Crops” report, Agriculture and Agri-Food Canada (AAFC) reported that harvest delays in Western Canada from excessive moisture, and in some cases, snow, continue to hurt wheat and durum quality. On Oct. 12, Canada Grains Commission (CGC) reported 20 percent of the tested Canadian Western Red Spring (CWRS) samples were No. 1 CWRS, compared to 45 percent in 2015/16. Twenty percent of the tested CWRS samples graded as Canadian Western Feed, compared to just 7 percent in 2015/16.

    AAFC pegged 2016/17 Canadian wheat production (excluding durum) at 24.2 million metric tons (MMT), up 9 percent from 2015/16 due to a 16 percent increase in average wheat yields that more than offset lower than expected harvested area. AAFC reported average wheat yields of 52.7 bu/acre (3.54 metric tons per hectare [MT/ha]) compared to 45.5 bu/acre (3.06 MT/ha) in 2015/16.

    Canadian durum production will increase to 7.31 MMT, up 36 percent from 2015/16 due to a 4 percent increase in harvested area and a 30 percent increase in yields year over year. While Canadian durum production increased in 2016/17, the abundant rainfall that boosted yield potential also hurt wheat quality.

    CGC reported 27 percent of tested Canadian Western Amber Durum (CWAD) samples graded No. 1 or No. 2 CWAD, compared to 58 percent in 2015/16. AAFC expects 2016/17 Canadian total wheat exports (including durum) to total 22.0 MMT, up 1 percent from 2015/16.

    European Union (EU): Following a record setting year in 2015/16, EU wheat production declined 10 percent to 136 MMT in 2016/17 according to Stratégie Grains (SG). This is 1 percent below the 5-year average of 138 MMT.

    Average EU soft (non-durum) wheat yields fell 11 percent year over year to 83.0 bu/acre (5.59 MT/ha) after excessive moisture lowered yield in France, Germany, the United Kingdom (U.K.) and Poland – the top four wheat producing countries in the EU.

    In addition to lower yields, quality is lower in France and Poland. SG estimates French milling output at 55 percent, a significant drop from 88 percent in 2015/16 and the 5-year average of 84 percent. Polish milling wheat output is pegged at 50 percent compared to 80 percent in 2015/16 and the 5-year average of 69 percent.

    Total EU milling supply is forecast at 81.9 MMT, down 24 percent year over year and 13 percent below the 5-year average.

    Black Sea: On Oct. 13, Russian consultancy SovEcon estimated 2016/17 Russian wheat production at 72.0 MMT, up 18 percent year over year due to increased yields. Favorable weather boosted Russian wheat yields to an estimated 41.5 bu/acre (2.79 MT/ha) compared to 37.6 bu/acre (2.53 MT/ha) in 2015 according to Russia’s Ministry of Agriculture.

    Grain Commentary

    Analyst group UkrAgroConsult reported Ukrainian farmers harvested 25.8 MMT of wheat this year, down 5 percent from 2015/16. Record yields of 61.9 bu/acre (4.16 MT/ha) were not able to completely offset the 12 percent reduction in planted area due to dry planting conditions last fall. Still production is 20 percent above the 5-year average.

    SG pegged 2016/17 Kazakh wheat production at 17.9 MMT, which would be up 31 percent from 2015/16 due to improved yields. USDA expects Black Sea exports to total 54.0 MMT, up 7 percent from 2015/16, if realized.

    SGS Russia, an independent crop inspection service, classified 18 percent of the Russian wheat crop as feed wheat, on par with data collected by the same date in 2015/16. High protein wheat (greater than 12 percent protein on a 12 percent moisture basis) is estimated at 1 percent of total production, medium protein (10.6 to 11.9 percent) milling quality wheat is 30 percent of the supply, and lower protein (8.8 to 10.6 percent) milling quality wheat is estimated at 51 percent of the crop.

    SGS reports the average protein of Ukraine’s 2016 wheat crop as 10.5 percent (12 percent mb) compared with 9.9 percent in 2015. The crop has lower average moisture and a much higher average falling number compared with 2015.

    Southern Hemisphere Wheat Development

    Argentina: Though Argentine wheat harvest typically occurs from late November through January, Bolsa de Cereales, the Argentine Grain Exchange, reported harvest started the week of Oct. 24 in areas where hot, dry weather hastened wheat maturity and stands at 3 percent of total planted area complete.

    In other parts of Argentina where wheat development is closer to a normal pace, excessive rains caused flooding in low-lying areas. On Oct. 13, the Buenos Aires Grain Exchange estimated 2016/17 Argentina wheat production at 13.0 MMT, up 19 percent from 2015/16 due to increased planted area. Argentine farmers planted 4.30 million hectares (10.6 million acres) of wheat for 2016/17, up 19 percent from 2015/16 in response to President Macri’s elimination of the wheat export tariff and currency devaluation.

    USDA expects 2016/17 Argentina wheat exports to fall to 8.0 MMT, down 12 percent year over year. If realized, exports would still be 21 percent more than the 5-year average.

    Australia: Cooperative Bulk Handling Ltd (CBH), Western Australia’s primary grain marketer and handler, lowered its harvest estimate for the state to 13 to 14 MMT on Oct. 25 due to widespread frost damage, compared to its previous estimate of 15 to 17 MMT.

    The east coast of Australia received five times its average September rainfall, which is also causing concerns about quality. Australian farmers increased planted wheat area for 2016/17 to 31.9 million acres (12.9 million hectares), up one percent from 2015/16. In September, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecast 2016/17 wheat production at 28.1 MMT, up 16 percent from 2015/16 due to favorable conditions early in the growing season.

    This estimate is likely to be revised when Australian wheat harvest begins in December. USDA expects Australian exports to increase to 20.5 MMT, up 28 percent from 2015/16 and 8 percent above the 5-year average.

    USW looks forward to sharing the latest news about the 2016 wheat crop at its annual series of Crop Quality seminars and personal visits from its representatives.

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