Welch on Wheat: Crop Conditions Unchanged

    Market Situation

    Crop Progress. The Crop Progress report released today shows no changes from the condition ratings last week. The crop condition score for U.S. winter wheat remains at 325, just below the 337 average.

    The condition of the Texas wheat crop declined again this week with the crop index slipping to 344 from 347, still well above average. Very poor, poor, and excellent categories all increased 1 percent while the percent rated fair decreased by 1 and the good down by 2.

    Ratings in Kansas declined slightly with 1% more of the crop in the very poor category, 1% less rated poor, a 2% increase in wheat rated fair, and a 2% decrease in the good. Excellent was unchanged.

    Oklahoma conditions improved with 1% fewer acres rated as very poor and 1% more considered to be in excellent condition.

    The Southern Plains combined index dropped 2 points from 305 to 303.

    Weather. Good rainfall coverage was seen last week in the hard red winter wheat production areas of the Southern High Plains, many reports of +2 inches. Moisture prospects for next week again favor Kansas, Oklahoma, and the Texas Cross Timbers and Blacklands.

    The El Nino/Southern Oscillation (ENSO) Diagnostic Discussion from the Climate Prediction Center of the National Weather Service this week added strength to the El Nino forecast for this fall. The May to July Seasonal Outlook reflects the cooler and wetter conditions in the Southwest normally associated with an El Nino weather phenomenon. The Seasonal Drought Outlook indicates conditions may get drier in the north central states.

    Commitment of Traders. Last week’s Commitment of Traders report showed increased selling pressure in the grains: open interest was up and net long positions and prices were down. The -281,458 net long contracts held by hedge funds is the lowest since the CFTC began tracking this investor class in 2006. The previous low was -275,166 on August 6, 2013.

    In the July 2015 Kansas City wheat contract, prices are down sharply with a forecast of increased precipitation, setting a new contract low of 510½ last Thursday. The spread between the old crop May Kansas City wheat contract and the new crop July increased to 5½ cents this week, putting carry at 36% (still in the neutral range, with <33% bullish and >66% bearish).

    Marketing Strategies

    2015 Wheat Marketing Plan. Wheat prices fell to new contract lows last week as widespread rain was expected to boost production prospects in many drought stressed growing areas. That is yet to be reflected in the crop condition index where the condition rating in the Southern Plains fell slightly this week.

    The 2015 Kansas Wheat Quality Council Hard Winter Wheat Tour will be held May 4 through 7. That field assessment of wheat yield and quality conditions across the state, and normally a northern tier of Oklahoma counties, will provide an assessment of the degree late rain has offset early drought conditions in much of the state. More information on the tour can be found here.

    With a normal yield, the level of price protection in my 65% Revenue Protection crop insurance policy is about $4.10, so I still face considerable downside price risk. My marketing plan calls for pricing an additional 20% before harvest.

    Upcoming Reports/Events.
    April 23 – South Plains Profitability Workshop, Lubbock
    April 24 – McLennan County Small Grain Tour, McGregor; Cattle on Feed
    April 30 – Concho/McCulloch County Wheat Tour, Millersview
    May 1 – Taylor/Callahan County Wheat Field Day, Abilene and Eula
    May 4 to 7 – 2015 Kansas Wheat Quality Council Hard Winter Wheat Tour
    May 5 & 6 – Grain Grading Workshop, Amarillo
    May 12 – WASDE, first estimates of the 2015/16 marketing year

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