Welch on Wheat: Crop Conditions Continue to Improve

    Market Situation

    Crop Progress. Based on winter wheat crop condition ratings in Monday’s Crop Progress report from USDA, the wheat crop condition index is up 3 points this week to 351 [cci=(1*%very poor) + (2*%poor) + (3*%fair) + (4*%good) + (5*%excellent)]. The percent of crop rated poor declined 1% and excellent increased 1%. The index moved closer to the average for this time of year of 355.

    In Texas, the crop index is down one point to 350 this week. The percent rated very poor is up 1%, fair down 2%, and good up 1%. The average Texas rating for this week of the growing season is 323.

    Weather. Following significant rainfall from South Texas to Nebraska over the last 24 hours, precipitation is expected move east then dissipate by the end of the week.

    In the ENSO update Monday, the latest weekly sea surface temperature (SST) departure is +3.0°C, up from +2.8°C last week. The current El Nino event is forecast to last until the June/July/August time frame.

    Commitment of Traders. Managed Money in the grain commodity markets was decidedly more bearish following last week’s WASDE report on Tuesday. Net long positions were lower in all four markets. Open interest was up last week and prices were down indicating new selling, a bearish speculative market indicator.

    The spread between nearby contracts in Kansas City wheat narrowed today to about 13 cents, down from 14 cents to start the quarter. 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 that is still in the commercial market bearish range (carry <33% bullish and carry >66% bearish).

    Marketing Strategies

    2016 Wheat Marketing Plan. Similar to the corn market, Kansas City wheat is trying to hold prices at the lows set in early September. 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.
    December 8 – Short-term Energy Outlook
    December 9 – Crop Production; WASDE
    December 18 – Cattle on Feed
    December 23 – Quarterly Hogs and Pigs
    January 10-16 – TEPAP (The Executive Program for Agricultural Producers), Unit I is full but space remains for Unit II, here
    January 12 – Crop Production; WASDE; Grain Stocks; Winter Wheat Seedings
    January 20-March 3 – Master Marketer, Abilene, Texas. Registration is now open, here

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