Welch on Wheat: Initial Crop Conditions Improve

    Recently planted and emerged wheat.

    Market Situation

    Crop Progress. Winter wheat plantings are just about normal, 88% complete as of November 1st compared to a 90% average. The national crop condition index score is 344, up 4 points from last week and just below the early season average of 358. Wheat rated very poor and poor account for 12% of the crop while the good and excellent stand at 49%.

    In Texas, the crop index is 336, down from 342 last week but still above the 329 average.

    Weather. Another round of wet weather covered much of hard red winter wheat country last week. Over the last six weeks the statewide estimate of soil moisture rated as short and very short has declined from 67% to 16%. The highest short and very short rating in a major wheat production area is 30% in the Southern Low Plains, but this is down from 96% in mid-September.

    The forecast for the next 7 days shows rain returning, lighter in the west, heavier in the east.

    In the ENSO update today, the latest weekly sea surface temperature (SST) departure is +2.7°C, up from +2.5°C last week.

    Commitment of Traders. Managed Money in the grain commodity markets was mixed in its market positioning last week. Though still positive, net long positions declined for both corn and soybeans. Both wheat markets are still bearish but Chicago wheat had an increase in long positions and fewer short contracts; KC wheat had fewer long contracts and an increase in short positions.

    The spread in the new crop futures between December and March Kansas City wheat continues around 14 to 16 cents. With a cost of carry from December to March of 18 cents (3 months at 6 cents per bushel per month), this number represent a percent of carry of 80 to 90%, a bearish market indicator (carry <33% bullish and carry >66% bearish).

    Marketing Strategies

    2016 Wheat Marketing Plan. Though there yet may be production issues with the 2016 world wheat crop ahead, supplies in the near term appear to be more than adequate. My marketing plan calls for pre-harvest sales in this time frame and I have priced the first 15% of next year’s crop.

    I am prepared to price an additional 15% before next year. That would bring me to 30% hedged as the crop emerges from dormancy. My plan calls for pricing another 20% in late winter and 20% in early spring. I will sell the final 30% at harvest.

    I hope I am wrong and prices move higher from here. If they do, I have much more wheat to sell. If prices go lower, I will be glad to have some the crop covered at a price above the insurance base price ($5.20).

    Upcoming Reports/Events.
    November 10 – Crop Production; WASDE; Short-term Energy Outlook
    January 10-16 – TEPAP (The Executive Program for Agricultural Producers), Unit I is full but space remains for Unit II, here
    January 20-March – 3 Master Marketer, Abilene, Texas. Registration is now open, here

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