Welch on Wheat: Weather to Play Key Role Next Few Weeks

    Market Situation

    Crop Progress. Monday’s Crop Progress from USDA shows the 2015 wheat crop starting off in near normal conditions. The crop condition index this week is 359, down 1 point from last week and 1 point above average.

    This year’s U.S. winter wheat trendline yield estimate is 47.2 bushels per acre. A normal early season crop condition index for Texas wheat is 329; Monday’s ratings were 343, up 2 points from the week before. The Texas winter wheat trendline yield for 2015 is 31.1 bushels per acre.

    Weather. The Texas Drought Report from the Texas Water Development Board continues to show 49% of Texas in moderate to exceptional drought. Much of this area will benefit from a storm system moving across today, bringing predicted rainfall amounts in excess of 1.5 inches across a wide swath of the state.

    Sea surface temperatures along the equator in the Pacific Ocean continue to run above average. The Climate Prediction Center expects the developing El Nino weather system to last into next spring, bringing a long range forecast of wetter and colder weather than normal for the Southern High Plains.

    An El Nino weather phenomenon brings the likelihood of below normal precipitation to Australia. Wheat in that region is maturing with harvest beginning in some areas in November.

    Commitment of Traders. Friday’s Commitment of Traders report showed a big drop in open interest to close out October, with most of the decline coming in soybeans. This appears to be short covering to close out the month as investors reassess their market expectations.

    Overall, hedge funds were about evenly split across the grain markets, holding 559,629 long positions, 562,192 short positions for a net of -2,563 net longs. Though prices across the board were higher, the price index fell due to the lower contribution of soybeans to the price average due to the drop in open interest.

    Marketing Strategies

    2015 Wheat Marketing Plan. I have priced all the wheat called for in my 2015 marketing plan at this time. Weather concerns will play a key role in the wheat market over the next several weeks as crops in the northern hemisphere get established and ready for dormancy while wheat in the southern hemisphere enters the heading and maturation stage.

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