Welch on Wheat: No Major Changes Likely in WASDE

    Market Situation

    Crop Progress. Today’s Crop Progress report from USDA shows the continued decline in the percentage of spring wheat rated good and excellent. These two categories were at 70% for several weeks in early August, fell to 68% on August 17th, 66% August 24th, 63% August 31st, and are 60% as of September 7.

    Spring wheat harvest is running behind normal with 58% harvested as of September 7th compared to a normal rate for this time of year of 78%.

    WASDE. Pre-report estimates for wheat in this week’s World Agricultural Supply and Demand Estimates call for steady numbers compared to August. Only minor changes are expected in both U.S. and world carryover stocks numbers.

    Weather. USDA reports today that 3% of the 2015 winter wheat crop was planted as of Sunday. The only area of Kansas that shows up as moderately dry is in the southeastern corner.

    Much of Oklahoma and Texas are still dry in the severe and excessive categories. Rainfall this week is expected to reach from eastern Kansas to north Texas.

    The Weekly ENSO Update from the Climate Prediction Center continues to forecast an El Nino event later this fall, setting the probability at 60-65%.

    The ONI for June/July/August was 0.0 and the most recent weekly sea surface temperature reading was above normal at +0.4°C.

    Even with a decline in the predicted intensity of this fall’s El Nino, the September to November precipitation forecast for the southern High Plains is wetter than normal.

    The map of sea surface temperature departures shows that over the last 4 weeks, some spots along the equator were cooler than normal (near the western coast of South America) and some warmer (between South America and the International Date Line, region 3.4).

    Commitment of Traders. Only modest changes in positions and prices were reported in Friday’s Commitment of Traders report from the CFTC. Hedge funds reduced bearish bets by 5,130 contracts while index funds held about steady. The price index was down 1 point.

    Marketing Strategies

    2015 Wheat Marketing Plan. I have priced all the wheat called for in my 2015 marketing plan at this time. The next component of my price risk management program will be the selection of the level of crop insurance coverage. We are near the end of the period in which the 2015 base price will be determined for many winter wheat producers, calculated as the average closing price of the July 2015 KC wheat contract from August 15 through September 14. The average as of today’s close is $6.35 per bushel.

    Additionally this fall, wheat producers will have the option of enrolling in the Supplemental Coverage Option, SCO. This is an area-based insurance product designed to supplement a producer’s individual crop insurance choice, basically covering the deductible from 86% down to the chosen level of coverage. This policy will be subsidized at a rate of 65%. Only crops that are enrolled in the Price Loss Coverage program, PLC, of the farm bill will be eligible for SCO.

    But since wheat producers will be required to make their crop insurance choice prior to program signup, all acres are eligible for enrollment with final coverage determination to be made when program choice is finalized and ineligible acres withdrawn. Check with your crop insurance agent for program details in your area.

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