Welch on Wheat: If Production Prospects Look Good – Well, Who Knows?

    Market Situation

    Crop Condition. The condition of the Texas wheat crop continues to run better than average according to the “Texas Crop Progress and Condition” reports. As of February 8, 15% of Texas wheat was in the very poor to poor condition, compared to 16% the week before. USDA will resume state and national crop condition ratings in early April, but some individual states continue to report through the winter.

    in late December to late January shows wheat in very poor and poor condition increased in Kansas from 9% to 13%, increased from 12% to 13% in Oklahoma, and decreased from 4% to 3% in Nebraska.

    The Texas top soil moisture condition report shows about 30% of the state acreage in very short or short moisture conditions in mid-February, down from 42% in mid-January.

    Weather. The weekly drought update from the Texas Water Development Board shows the persistence of drought conditions from the High Plains down across north Texas. Moisture has been light in most of the Southern High Plains over the last two weeks and forecast amounts for the week ahead are below ½ inch. Conditions in this region are not expected to improve for the rest of the month.

    Commitment of Traders. Managed money positions in the grain markets were increasingly bearish last week, decreasing net longs by another 27,000 contracts. Hedge funds added to net short positions in corn and soybeans, but were less so in wheat. This class of investor still holds a net long position in corn.

    Prices have declined over 50 cents since the first of the year, but are up 28 cents in the July contract since the first of February. Carry in the nearby Kansas City wheat contracts is still in the bullish range (below 33%).

    2015 Wheat Marketing Plan. I have priced all the 2015 wheat called for in my marketing plan at this time. With a 65% revenue protection crop insurance policy in place, I intend to price at least another 20% this spring. If production prospects look favorable, I am prepared to price up to 80% before harvest.

    Upcoming Reports/Events.

    February 19-20 USDA Agricultural Outlook Forum

    February 20 Cattle on Feed February 26 Grain Market Report

    International Grains Council February 27 FSA deadline to reallocate bases and update yields

    March 10 WASDE

    March 20 Cattle on Feed

    March 27 Quarterly Hogs and Pigs

    March 31 ARC/PLC decision at FSA Grain Stocks Prospective Plantings

    April 6 USDA Crop Progress reports resume

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