Welch on Wheat: Exports Remain Above Pace Despite Strong Competition

    Market Situation

    Crop Progress. USDA has suspended its weekly crop condition updates until early April.  Reports from selected winter wheat producing states will still be available on a monthly basis over the course of the winter.  

    Reports released January 3rd for conditions as of the end of December show declining crop conditions in Kansas, Oklahoma, Montana, and Colorado. These states accounted for half of the U.S. winter wheat crop last year.

    While Texas did not report specific wheat crop condition ratings, USDA’s Crop Progress-State Stories notes that some winter wheat suffered in dry areas of Texas.

    Weather.  A comparison of drought monitor maps for the last 2 months shows the increasingly dry conditions in many wheat producing areas of the Southern High Plains.  Severe to Exceptional drought conditions cover 56% of Oklahoma and 14% of Kansas.  Colorado drought ratings are basically unchanged as improving conditions in the west have offset deteriorating conditions in the wheat producing east.

    Snowfall totals (Thursday through Saturday) in the range of 1 to 5 inches are expected to provide some precipitation for these areas with dry conditions to return again next week.

    The ENSO discussion this week from the Climate Prediction Center reports a reading of -0.3°C for the weekly temperature differential in the eastern Pacific.  The current forecast path is for a mild La Nina event to be just about over by the end of February.

    Grain Commentary

    Unable to display feed at this time.

    Grain Use.  Despite a strong dollar and plentiful export competition, U.S. wheat export sales are still on pace to reach USDA’s target of 975 million bushels, 200 million bushels more than in the 2015/16 marketing year. Wheat inspected for export out of the Texas gulf is very near normal.

    Wheat priced as a feed grain is 87% the price of corn, about on par with grain sorghum in the central Texas panhandle.

    Commitment of Traders.  The Commitment of Traders report released today shows more bullish positioning by money managers to start the new year.  For the four contracts monitored here, long positions increased 8,703 and short holdings decreased by 5,249 for a net long increase of 13,952.

    Soybeans and hard red Kansas City wheat are still the only contracts that are net long overall.  The price changes on Tuesday compared to the week before were down for wheat and soybeans and up slightly for corn.

    The spread between March and May Kansas City wheat futures contracts is 12 cents today, right at full carry for that 60 day period (2 months x 6 cents per bushel/month = 12 cents).  Any percentage of carry above 67% is generally considered to be a bearish commercial market indicator.

    Marketing Strategies

    2017 Wheat Marketing Plan. I have not yet priced any new crop wheat. I am waiting to see if we get any price strength from what looks to be fewer acres in 2017 and a drier than normal weather outlook this winter. The July contract is trying to turn around the downward trend in place since last spring with the close the last two days>4-day moving average>9-day moving average>18-day moving average.

    Upcoming Reports/Events.

    January 8-14 – The Executive Program for Agricultural Producers, information available at
    January 10 – Short-term Energy Outlook
    January 12 – Crop Production; WASDE; Grain Stocks; Winter Wheat and Canola Seedings
    January 25-26 – Feed Grain Marketing Plan Workshop, Amarillo
    January 27 – Cattle on Feed

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