SASKATOON — Bruce Burnett doesn’t see anything in the 2024-25 wheat market that screams rally.
The International Grains Council is forecasting 392 million tonnes of production by the major exporters, an eight million tonne increase over 2023-24 levels.
The United States and Australia will be responsible for most of the increase, said the MarketsFarm analyst.
Ending stocks are forecast at 59 million tonnes, relatively unchanged from the 61 million tonnes estimated for this year.
That is historically tight, but the market has been bearish wheat for a long time, and it is not enough of a squeeze to get the market excited.
Burnett told growers attending the firm’s The Long and Short on Markets: Spring 2024 Edition webinar that there will have to be drought in one or two key exporting regions of the world to prompt a rally.
That doesn’t appear likely in at least one of the major exporting countries. Drought conditions in the U.S. southern Plains have eased considerably.
Crop conditions in Kansas are the best they have been since 2016.
U.S. hard red winter and hard red spring wheat ending stocks are expected to rebound to nearly 700 million bushels in 2024-25 from less than 400 million a couple years ago.
As a result, farmers should not expect hard wheat to maintain its large premium to soft wheat.
“That’s probably going to be the biggest headwind that we have going forward in the next little while,” said Burnett.
The other headwind is that managed money funds remain bearish wheat with 22,733 contracts, or 3.1 million tonnes, net short in the Minneapolis spring wheat market as of March 19.
He thinks the funds are betting on nearby Minneapolis wheat futures eventually falling below US$6 per bu.
There are a couple regions of the world where drought is a definite possibility. Canada is unfortunately one of them.
“Most of the (Canadian) Prairies have received less than normal precipitation this winter, so we’re not making up for those deficits that we built last year,” said Burnett.
Russia is another country to watch. The spring wheat regions look OK, but it is dry in the winter wheat growing areas further west in the Southern, North Caucasian and Volga districts.
“If we don’t get those April rains in Russia, we’re going to see some difficulties,” he said.
Australia is likely to benefit from the shift from El Nino to La Nina conditions in late summer.
MarketsFarm is forecasting a 600,000 tonne increase in Canada’s wheat production to 28.5 million tonnes, which shouldn’t be too burdensome due to the tight 2.51 million tonne carryout from the 2023-24 crop.
Canada’s record wheat export program has been one of the few bright spots in the spring wheat market this year.
Carryout in 2024-25 is forecast to climb only slightly to 2.81 million tonnes.
North Africa’s durum production is forecast at 4.1 million tonnes, up only slightly from last year’s disappointing 3.95 million tonne harvest. There should be good demand in that region.
The problem is that Canada has been losing market share in the entire Mediterranean Basin to Turkey, Russia and Australia.
Canada’s sales to Italy are down 68 percent this crop year compared to the previous campaign.
Canada’s total exports to all destinations to date are a paltry 2.18 million tonnes with 19 weeks left in the crop year.
However, production was curtailed in 2023-24, so carryout is expected to be tight at 649,000 tonnes.
MarketsFarm is forecasting 5.25 million tonnes of production in 2024-25, up from 4.05 million tonnes last year. Carryout will remain snug at 535,000 tonnes.
However, production could easily be the same as last year, given the early-season dryness, and that would mean another year of limited exports.
The cash durum-spring wheat spread was $2.63 per bu. at the time of Burnett’s March 27 presentation. It has been dropping since the fall of 2023 due to the dismal export program.
“That’s probably the main threat to the durum market,” he said.
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