Welch on Wheat: Exports Set Strong Pace

    Market Situation

    Crop Conditions. In this week’s Crop Progress, USDA reported that 83% of the winter wheat crop had been harvested, just ahead of a normal pace of 79%.

    U.S. spring wheat is rated at 68% in good and excellent condition, down from 69% last week. Condition ratings the last couple of weeks have fallen just below last year for this crop that is maturing ahead of normal.

    These ratings are consistent with results from the just concluded Wheat Quality Council’s hard red spring wheat tour. The tour estimated yield for this season is 45.7 bushels per acre, down from last year’s 49.9 bushels and a five-year average of 46.0 bushels.

    The average durum wheat yield is estimated at 45.4 bushels per acre, up from 39.2 bushels last year and a five year average of 39.3 (Reuters).

    Weather. In hard red winter wheat country, rainfall last week missed most of Texas and Oklahoma, favoring Kansas and eastern Colorado.

    The crop moisture index from last week shows much of the Southern High Plains getting dry. Over the next 7 days, a round of showers is forecast across the Texas Panhandle, western Oklahoma, and northward.

    The most recent weekly sea surface temperature observation related to the Oceanic Nino Index is -0.6°C for the second week in a row. The La Nina Watch continues with the forecast path of the ONI falling below the threshold late this fall to early winter.

    Grain Use. Yesterday’s export sales report showed wheat commitments of 19 million bushels, above the 13 million bushel pace needed to reach USDA’s marketing year target of 925 million.

    Wheat inspected for export from the Texas gulf is still below average for this early point in the marketing year, but is up from last year’s record low levels.

    Cash wheat prices continue to reflect a value for feed. Cash wheat in the central Texas Panhandle is priced this week at 90% of corn; sorghum at 82%.

    Commitment of Traders. Managed Money traders continued their move to more bearish positions Tuesday, soybeans the only contract monitored here that is still net long. In corn, the number of long contracts held by Managed Money traders was down 14,770 contracts and the number of short contracts held increased 23,043. In soybeans, where the number of long contracts still outnumbered short positions 7:1, the number of longs and shorts both decreased.

    Grain Commentary

    Unable to display feed at this time.

    In both wheat markets, the number of long contracts held by managed money remained about the same as they have been all year, but the number of shorts increased again this week for both, +11,122 in Chicago and +6,997 in KC.

    The spread between new crop September Kansas City wheat and December is 26 cents today, above full carry for that 90 day period (3 months x 6 cents per bushel/month = 18 cents). Any percentage of carry above 67% is generally considered to be a bearish commercial market indicator.

    Marketing Strategies

    2017 Wheat Marketing Plan. My focus now turning to the 2017 crop, I will use the same marketing plan format as last year and begin the budget process to set marketing targets. At this point, it looks like the RMA base price will likely be the lowest in a decade.

    Upcoming Reports/Events.
    July 1 – Registration open for The Executive Program for Agricultural Producers (TEPAP), January 8-14, 2017
    August 9 – Short-term Energy Outlook
    August 12 – Crop Production; WASDE
    August 19 – Cattle on Feed
    August 22-25 – Pro Farmer Midwest Crop Tour

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