Posted on March, 25, 2025 at 10:16 am
Tyson Giles, director of trading in the wheat product line at CHS, Inc., Inver Grove Heights, Minnesota, US, issued a 2025 spring wheat and durum outlook amid concerns about impacts from tariffs on March 11 during the North American Millers’ Association (NAMA) Spring Conference.
US wheat prices spiked in the spring of 2022 after Russia invaded Ukraine but have since trended lower and dropped back to pre-war levels. However, flat prices remain high globally, Giles said, which has weighed on export volumes at times.
The 2024 US spring wheat crop featured high protein in the western production areas of central and northeastern Montana and western North Dakota. eastern North Dakota and northwest Minnesota wheat had below-average protein. That created a challenge for elevators to blend the 14% protein wheat most commonly sought by the milling market, Giles said.
He reminded attendees of a 30-year downtrend in spring wheat acreage and said there was potential for a further drop to 9.5 million acres or lower from 10 million acres in 2024. Those models reflect the expansion of corn and other row crops into the spring wheat production area with a push from biofuel subsidies.
The US Department of Agriculture (USDA) on March 11 reduced its estimate of hard red spring wheat exports by 5 million bushels, to 265 million bushels, for the 2024-25 marketing year, up from 235 million bushels the previous year. The export pace has been steady, but tariffs pose challenges to the competitiveness of US prices, Giles said. Lower protein wheats typically ship out of Great Lakes or Texas Gulf ports, frequently to Europe and Mexico, two areas of concern for retaliatory tariffs. That has left the market concerned while some US tariffs are in a second month-long pause, resulting in increases hand-to-mouth strategies, he said.
“(Spring wheat) export commitments have been on a good pace over the past five years,” Giles said. “I would expect that to tail off with the unknowns. Stocks in Duluth have rebounded, though they are in the middle to low end of the range of the past five years We’re heading into March-April-May, when the Lakes open back up, so we’ll see if there’s any export demand that gets pulled out.”
The spring wheat balance sheet doesn’t appear heavy at 35% stocks-to-use, but the possibility of a cut to exports and an average yield topping the USDA’s projection has supported CHS’s forecast for stocks-to-use moving into the mid-40% range, Giles said.
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“We are going to see a pretty dramatic carryover of the low-protein supply,” he said. “There’s been very good protein premiums on spring wheat, currently 6¢ up and 10¢ to 12¢ down, so there are premiums to be had for 14% or better protein, which incentivizes farmers, but a lot of this carryover will be low-protein wheat, and where will we go with it? As of last week, we were about 10¢ from lower-protein spring wheat working into HRW (hard red winter), so that could potentially be an option. But if the farmer decides to move his crop once we get into spring planting and beyond, we’re going to need those markets in Europe and Mexico. What are the tariff challenges we could see from that?”
Beyond the well-known US tariff and reciprocal tariff concerns for agricultural commodities, the market is watching $1 million port-docking fees being enacted for Chinese-built and Chinese-flagged vessels, which account for about 50% of the global fleet. That would equate to an extra $20 to $30 per ton for exports, reducing competitiveness for US commodities.
With weeks to go before some Northern Plains growers begin to plant the 2024 crop, the market is watching dryness concerns following “unusual snowfall” throughout the winter that provided moisture to select areas, Giles said, but western North Dakota cropland is slightly dry on the US Drought monitor. Soil moisture profiles will be dependent on spring rains.
Potential opportunities in the spring wheat market this year were identified. The 2024 carryout, comprising mostly sub-14%-protein spring wheat, could work into greater substitution for hard red winter wheat as values get similar. Also, if 2025 crop develops similarly to last year in terms of protein, “we’ll continue to see protein premiums and discounts widen,” he said.
“From a futures perspective, the Russian dryness is of concern,” Giles said. “There are reports of a certain amount of their crop that did not germinate, so the futures market could go into a bid situation, which would mean we would have to be defensive on basis to compete flat price globally, but it could bring some potential activity in the next four to eight weeks as we watch how the Russian crop comes out of dormancy.”
Giles reminded the audience that the US durum crop, which is grown largely in a small section of northwest North Dakota and northeast Montana, is highly affected by less-than-ideal weather conditions. Durum prices today are down about 50% from the highs of 2023 during the second of two drought-challenged years in the region. The Arizona desert durum crop, which was 99% planted, 86% emerged and 10% headed by March 16, per the USDA, comprises 40% fewer acres than in 2024.
“It really comes down to substitute crops and return per acre, so we’re seeing growers differentiate their crops,” Giles said.
The US durum wheat balance sheet for 2024-25 features beginning stocks at 21 million bushels, down 25% from 2023; production at 80 million bushels, up 36%; and imports at 50 million bushels, up 11%, for a total supply of 151 million bushels, up 14%. Exports for the marketing year were estimated at 20 million bushels, down 26% from 2023, and food use was pegged at 84 million bushels, up 1 million bushels, for a total use of 107 million bushels, down 4%, and a projected carryout at 45 million bushels, up 114% from 2023.
Giles noted a long-term trend in declining durum acres broken by a relative plateau between 1.6 million and 1.7 million acres from 2020 to 2023 before area increased in 2024 to 2.1 million acres. He forecast 2025 durum area between 1.8 million to 2.3 million acres.
Durum yields are highly weather-dependent and magnified because of the small geographic production areas, Giles said.
“This year we did see nearly 40 bushels per acre on average, but if you really break it down between North Dakota and Montana, a 100-mile difference, we had North Dakota farmers that were yielding 60 to 70 bushels an acre, and when you get into Montana, 15 bushels,” Giles said. “A tale of two crops. Also in Montana, with those reduced yields, we are seeing a little bit lighter test weight, but protein is very high.”
Durum production rebounded to 80 million bushels in 2024, which nearly covers domestic usage, he said. Food use of durum was expected to remain stable. The pace of durum imports, projected in March by the USDA at 50 million bushels, has been extremely high amid on-again, off-again tariffs.
“There’s been a race to get supplies from Canada, our largest exporter into the US, typically bringing in about 500,000 tonnes,” he said. “Through the end of January, we had already brought in 400,000 tonnes six months into the Canadian shipping calendar. Over the next six months we have 100,000 tonnes to go. As we’ve kicked out these tariffs, more and more durum has rushed in over the past month and a half. I anticipate imports will grow this year, further extending the carryout.”
US durum exports, like the other wheat classes, have been uncompetitive globally. The USDA on March 11 lowered its projection 5 million bushels, to 20 million bushels. Through the first nine months of the marketing year, US durum exports stood at 11.3 million bushels.
“If you look the next three months, we need to average about a Handymax bulk carrier worth exported per week, and there’s no possible way we can get that number,” Giles said. “Currently most exports have been out of the Texas Gulf, primarily to the European and North African markets. The latter has been down sharply year over year because of price. We’re about $25 to $30 a ton uncompetitive, so it’s been very much a domestic market.”
Durum stocks-to-use levels, comfortable at 35%, are projected to increase, Giles said, assuming exports fall as low as 15 million bushels. Demand from Mexico will endure, but tariffs could complicate that market and bring stocks-to-use up to 45% to 50%, he said.
“There are two really big factors beyond tariffs that are going to move this market this year,” Giles said. “We talked about Arizona acres down 40%. Mexico is having the same challenges with water, so acres are down drastically after the government took away subsidies. Mexico’s typical durum export level between 500,000 to 800,000 tonnes, and that could flip year-on-year to Mexico being an importer of 250,000 to 500,000 tonnes. Some growers may do some substitution away from durum into other 13% and 13.5% protein hard wheats and then use additives for their pasta production, which would benefit HRW production and lower-protein spring wheat. But again, tariffs, tariffs, tariffs.”
Turkey shifted to a large global exporter two years ago when US durum spiked to nearly $700 a tonne from $350 in an eight-week period due to persistent drought in the United States and Canada. Turkey increased acres seeded to durum, had ideal production weather and purchased cheap imports from the Black Sea area. Turkey durum exports are expected to reach the 1.8-million-tonne level notched two years ago. However, the Turkish government limited exports and is now thought to be sitting on 800,000 to 1 million tonnes of supply. That could work to Turkey’s favor because weather has been dry and this year’s crop will rely heavily on spring rains, but if they have another bumper crop, the government stocks could be a burden, Giles said.
Ultimately, tariffs are the top factor to watch as the next durum marketing year unfolds.
“How long will (tariffs) last?” Giles said. “Four weeks, four months, four years and beyond? From the first Trump administration, 10% tariffs on China stuck through the Biden administration. Ultimately, and this delves into personal opinion, I think that’s where the pressure is aimed, and the US is trying to use our partners to the north and south to achieve that. Trade flows are going to shift. The market will figure out trade flow, but they will change.”
Source: World Grain