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KANSAS CITY — Optimistic forecasts for weather, grain and oilseed supplies coupled with mixed ideas about prices this summer and for the 2023-24 marketing years took center stage at the Sosland Purchasing Seminar held June 4-6 in Kansas City.
It was the 46th annual presentation of the seminal food ingredient seminar by the 101-year-old Sosland Publishing Co. Attendance at the event was on par with levels last seen before the COVID-19 pandemic, Josh Sosland, president of SPC and editor of Milling & Baking News, said in his welcome address June 5.
Drew Lerner, senior meteorologist, founder and president of World Weather, Inc., noted current dryness in parts of Canada and the United States, but forecast improving moisture conditions into July, which would be beneficial for spring planted crops in North America. But cooler, wetter summer weather also may mean an early frost in some areas, he warned. Mr. Lerner also discussed the potential effects of the emerging El Niño weather pattern in the coming months.
The bakery flour market will require adequate supplies of spring wheat this year while a bullish hard red winter wheat market will limit export sales opportunities, Bill Lapp, founder and president of Advanced Economic Solutions, said in the opening outlook session June 5. He provided a brief recap of the previous year’s wheat market before delving into the fundamentals as they stand. Last year, prices peaked in mid-May and then declined sharply three months later. War in eastern Europe was not as impactful as feared, and US wheat exports did not benefit at all in 2022 from the disruption in the Black Sea region, he said. A “short crop, long tail” dynamic unfolded as the market reacted to bullish fundamentals by sending prices higher before rationed demand slowly brought prices lower.
As for the 2023-24 marketing year, the outlook is mixed, Mr. Lapp said, featuring abundant-to-excessive soft red winter wheat supplies while hard red winter production will be sharply lower due to excessive drought in the US Plains. As for hard red spring and durum wheat production, “It’s too early to tell” about hard red spring wheat and durum production, he said, adding, “Those crops had a better start than anticipated.”
Mr. Lapp focused extensively on the drought-crimped hard red winter crop in the southern Plains in his domestic outlook. The June 30 USDA Acreage report “will give us a better read on the percent harvested, which is a big unknown right now,” he said. Some analyses in that regard “can sometimes overdo it and therefore understate the crop,” he noted.
In the global market, record-high wheat production of 790 million tonnes was expected, Mr. Lapp said, with year-over-year declines in Australia, Russia and Ukraine being offset by increases in Argentina, Canada, the European Union, China and India. Increased world production by about 1.5 million tonnes comes amid expectations for world wheat stocks to remain at historically low levels, having declined by nearly 20% each of the past six crop years.
Mr. Lapp indicated both US wheat carryover and stocks-to-use ratios would be similar to last year.
“There is no reason to think that prices will relax very much,” Mr. Lapp said, urging bakers and other flour buyers to “err on the side of caution in managing risk over the next year,” and to add coverage when price declines of around 10% occur.
Weather, expanding acres and significant growth in the biodiesel sector were primary drivers in the soybean market, said Alex Norton, president at Beeson & Associates. But of the three, weather was likely the main driver.
The 2023 US soybean crop has been planted at a much faster-than-average pace, Mr. Norton said. He expects the USDA June 30 Acreage report to show a slight increase in soybean acres given the pace of planting and support from weather forecasts.
“We don’t know exactly what summer weather is going to be, but just because there’s an El Niño in place doesn’t mean it’s going to be a great crop or a bad crop, but there’s kind of equal chances for a slightly better to normal crop, historically, in terms of getting a decent yield,” Mr. Norton said.
An increase in soybean production may further support already robust crush numbers. Despite the expanding crush, carryover has receded, but Mr. Norton said the reduction primarily was related to one rapidly growing industry.
“We’ve not had (carryover) quite this low and to have it low two years in a row, it’s just all being driven by the rise in demand for renewable diesel,” Mr. Norton said.
Currently around 45% of all the soybean oil produced goes into manufacturing biodiesel, and that percentage is expected to grow, he said. Given the industry’s extreme investment in infrastructure, ideas were the final numbers from the Environmental Protection Agency, set to be released June 14, would be more supportive than previously indicated, he said.
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