I can feel it already — 2021 is going to be a good year. And if the market outlooks for wheat and durum in Western Canada are anything to go by, we’re off to a great start.
In mid-January, during MarketsFarm’s webinar — Markets Outlook Summit: 2021 Overview — Bruce Burnett, MarketsFarm’s director of weather and markets information, discussed how he sees the wheat and durum markets shaping up. It was an interesting analysis and I’ve pulled out some of Burnett’s insights for you.
To sum up, prices for wheat and durum are expected to remain strong over the next few months as exports continue to outpace last year’s, said Burnett. Also, spring wheat area is going to drop and durum area is expected to increase in North America.
Any concerns about winter wheat are focused on the United States and Russia, as both countries need rain over the next two months. If any problems develop in these regions, we could see prices continue to move higher.
Wheat outlook highlights
Wheat prices in Western Canada have been slowly increasing since August’s rally. And Russian tariffs have boosted prices in the Black Sea and Europe. Burnett said he thinks this will help push demand into Western Canada for wheat for the next three to six months.
Another interesting thing to note is Minneapolis wheat has traded below Chicago wheat for the longest period in recent history — six months at the time of writing this column. This means protein is being undervalued in spring wheats and export values are essentially giving away some of the protein content in the United States and Canada. It’s an undervaluation of proteins in the world market, said Burnett, which will eventually correct.
Spring wheat area is going to drop next year by five million to six million acres in the United States and Canada. This will depend on how prices move over the next month or so. Spring wheat area will be under pressure from more profitable crops.
Global wheat supplies remain adequate, however, due to those Russian export tariffs there’s tightening supplies in the major exporters — which is good news for global wheat markets. Export supplies will continue to be limited by the Russian tariffs until new- crop wheat supplies gain more certainty. “They’re going to have to move higher, especially in the Asian basin,” said Burnett.
USDA world wheat ending stocks, although lowered in January, are still at record levels at just over 313 million tonnes. China holds a larger supply than the rest of the world at almost 159 million tonnes. If those numbers are to be believed, “wheat should be trading significantly lower than it currently is because of the excess stocks of wheat in the world — but that’s not happening,” said Burnett. Strong wheat imports from China are likely going into both food and feed markets.
Some more good news is U.S. wheat ending stocks are at their lowest levels since the 2014-15 crop year. U.S. winter wheat area increased by 1.6 million acres last fall, however, due to drought conditions over a good portion of the Southern Plains, Burnett said the harvested area probably won’t reach those levels.
Canadian wheat exports remained strong through to the end of December and are 1.67 million tonnes ahead of last year. Burnett sees wheat export velocity increasing for the remainder of the crop year.
Durum outlook highlights
Durum exports had a slow start but have recovered since the beginning of October and we’re now ahead of last year. Strong export demand from Italy — at a 10-year high — has resulted in strengthened durum prices, said Burnett. Morocco has been the second- largest importer of durum. He expects durum exports to increase about 100,000 tonnes from last year.
Recent rains have improved soil moisture reserves in the Mediterranean for the 2021 crop. Meanwhile, Turkey needs moisture to boost soil moisture reserves in the coming months.
Burnett anticipates strong durum exports into the May-June period and then we may see it taper off. However, these strong exports should keep prices at these levels or moving higher.
The St. Lawrence Seaway closure is limiting export opportunities and exports will slow over the next two months. When the seaway opens again, strong exports are expected through June and July. Additionally, delays in the Panama Canal passage have increased the costs of movement through Vancouver.
North American durum area is likely to go up this spring on both sides of the border.
These are only the highlights from the Jan. 14 webinar. The second of this free series of four webinars will be held on March 11. If it’s anywhere near as interesting as the first in this series, it will be time well spent.