Welch on Wheat: Crop Conditions Now in Line with Normal

    Market Situation

    Crop Progress. Today’s Crop Progress report is the last of the 2015 season. Weekly national condition reports will resume April 4, 2016. The wheat crop condition index is up 3 points this week to 355, right at the long term average. The percent of crop rated poor declined 1%, fair declined 1%, and good was up 2%.

    In Texas, the crop index is up 6 points this week to 362. The percent rated very poor is down 1%, fair down 3%, and good up 4%. The average Texas rating for this week of the growing season is 322. Selected state condition reports will be available monthly after the first of the year.

    Exports. U.S. all wheat export sales for the week of November 19 were 11 million bushels, just above the pace needed to reach USDA’s projected marketing year target. Cumulative sales are at 65% of the estimated total. On average, wheat export sales commitments at the end of November are at 69% of the marketing year total.

    Weather. Rainfall in excess of 2 inches was common in November from west Texas to Nebraska.

    The forecast for the week ahead is for drier conditions to prevail, after a major snow storm moves through the northern plains.

    In today’s ENSO update, the latest weekly sea surface temperature (SST) departure is +3.0°C, down from +3.1°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 in the last position report of the month. Net long positions were lower in all four markets. Open interest numbers were down to end the month as traders exited positions ahead of the holiday.

    The spread between nearby contracts in Kansas City wheat widened today to about 16 cents, up 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 in the commercial market bearish range (carry <33% bullish and carry >66% bearish).

    Marketing Strategies

    2016 Wheat Marketing Plan. The July ’16 Kansas City wheat contract set a new low last Friday at 487.50 but closed up 7 cents today to 495.25. Since falling 16 cents after the November WASDE, prices have met overhead resistance at the 500 level.

    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.

    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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