Market Situation
Crop Progress. This week’s Texas Crop Progress and Condition report notes fall wheat seeding is underway with some areas of the High Plains delayed because of rainfall. Soil moisture conditions across the state are mostly favorable for sowing the 2017 crop.
Weather. The Crop Moisture Index shows most of the Southern High Plains to be in good shape for the winter wheat crop going in.
Total precipitation over major wheat producing areas the next 5 days is heaviest from the Rolling Plains in Texas up across the eastern half of Kansas.
The most recent weekly sea surface temperature observation related to the Oceanic Nino Index is -0.7°C. The average temperature departure in June/July/August was -0.3°C, the second consecutive tri-monthly period officially back in the neutral zone. While the Climate Prediction Center still forecasts the probability of a La Nina event this fall is in the 55-60% range, the average path of forecast models favors neutral conditions to continue.
The ENSO climate Wrap-Up from the Australian Bureau of Meteorology is consistent with that of our CPC: ENSO remains neutral but a late and weak La Nina remains possible.
The spring (September to November) precipitation forecast calls for most of the country to have about even chances for drier or wetter conditions with parts of southern Western Australia, major wheat producing areas, to be drier than normal. Much of the wheat in Australia will be in the temperature and moisture sensitive heading and maturing stage in October.
Grain Use. Cash grain prices continue to support the use of wheat for feed. Last week in the central Texas Panhandle, cash wheat prices were at 92% the price corn.
Marketing year total wheat export inspections out of the Texas Gulf are still 31% below normal but are 39% above last year’s record low level. Export sales commitments for all wheat are at 435 million bushels for the marketing year. The sales pace for last week was just below where it needs to be to hit the marketing year target, but cumulative sales for the end of August are right the average of where we should be this early in the season.
Commitment of Traders. The Commitment of Traders report last Friday showed traders moving to more bearish positions in corn, soybeans, and wheat, with soybeans the only commodity of the four that is still net long. Corn, soybeans and soft wheat all saw a move to fewer longs and more shorts; KC wheat had increases in both longs and shorts but 1,607 more contracts that were short.
The spread between new crop December Kansas City wheat and March is 17 cents today, just below 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. We are now in the price discovery period for the RMA base price. The average price as of today is $4.61.
July wheat is up a little over a dime from life of contract lows set last week, even in the face of big crops from our export competition and favorable sowing conditions in the U.S. for the 2017 crop. I am not ready to price any 2017 wheat at these levels and will reevaluate after we get the insurance price set for next year and see if we get some spillover support from other grain markets in the September WASDE.
Upcoming Reports/Events.
September 7 – Short-term Energy Outlook
September 12 – Crop Production; WASDE; FSA Crop Acreage Data
September 23 – Cattle on Feed
September 30 – Grain Stocks; Small Grains Summary; Hogs and Pigs
January 8-14 – The Executive Program for Agricultural Producers, information available here
