Welch on Wheat: Texas Crop Conditions Improve

    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 March 8, only 11% of Texas wheat was in the very poor to poor condition, down from 12% the week before. A year ago, 45 to 50% of the state’s wheat crop was in very poor or poor condition. This week’s ratings saw a 1% decline in the poor, 3% decline in the fair, and a 4% increase in the good. Very poor and poor wheat conditions in Kansas were estimated at 13% as of March 8; Oklahoma wheat on the same date in the same condition was estimated at 15%.

    The Texas top soil moisture condition report shows 24% of the state in very short or short moisture conditions. This is down from 37% of the state acreage last week and down from 42% in mid-January.

    Weather. Much of Nebraska, Kansas, eastern Colorado, western Oklahoma, and the panhandle of Texas received only light amounts of precipitation over the last 2 weeks (< ½ inch). That situation is forecast to continue over the next 7 days. Heavier amounts are expected east of interstate 35.

    The El Nino/Southern Oscillation (ENSO) Diagnostic Discussion from the Climate Prediction Center of the National Weather Service this week features an upgrade from an El Nino watch to an advisory. El Nino conditions are now considered to be present, up from the official neutral status since March/April/May of 2012.

    WASDE. Only minor adjustments were made to the U.S. and world supply and demand balance sheets in today’s World Agricultural Supply and Demand Estimates from the World Agricultural Outlook Board. No changes were made in estimated U.S. wheat supplies in the 2014/15 marketing year and the only use category revised was seed, +1 million bushels. This increase in domestic use lowered expected carry out by the same amount. The U.S. wheat stocks to use ratio is 33.14%, down from 33.21% last month. Domestic wheat days of use on hand at the end of the marketing year are a projected 121 day supply.

    The projected season average farm price was unchanged at $6.00 per bushel. With a farm bill reference price of $5.50, this price would not trigger any wheat PLC payments for 2014/15.

    World wheat numbers were little changed as well. Only fractional adjustments were made to supply and use leaving the days of use on hand estimate unchanged at a 101 day global supply at the end of the marketing year (May 31, 2015).

    Commitment of Traders. This week’s Commitment of Traders report shows hedge funds reducing net short positions by over 30,000 contracts but index funds net long by 46,000 fewer. This is the lowest level of net longs held by index fund investors in the grain complex since the summer of 2009. The biggest changes this week among the grains was an increase in net long soybean contracts of 26,912, though hedge funds are still net short beans by 8,764 contracts. Hedge funds were net short 2,982 fewer soft red winter wheat contracts and net long 2,689 more in corn.

    In the July 2015 contract, prices have declined 83 cents since the first of the year and set a new new crop contract low this week at 5.22¾. The spread between the old crop May Kansas City wheat contract and the new crop July is 4½ cents, putting carry at 37% (in the neutral range, with <33% bullish and >66% bearish).

    Marketing Strategies

    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.
    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
    April 7 – Short-term Energy Outlook, Energy Information Administration
    April 9 – WASDE

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