Welch on Wheat: Weak Week for Exports

    Market Situation

    Crop Progress. The U.S. spring wheat crop condition index went up this week for the first time all season, plus 3 points to 274. The fair and good categories were both reduced by 1 point and the excellent gained 2.

    South Dakota spring wheat rated very poor and poor held steady at 75%, Montana 63% in those same categories (+5%), and North Dakota at 40% (-4%).

    Spring wheat harvested this week is 24%, just ahead of the five-year average of 21%.

    Weather. Drought conditions were about steady this week for the U.S. as a whole with the main concentration still the North Plains.

    The heaviest rain this week is forecast for the Southern High Plains and the Southeast.

    The temperature outlook is for cooler than normal temperatures to continue over most of the Corn Belt.

    The Oceanic Nino Index from the Climate Prediction Center for May/June/July was reported today at 0.3° C above normal. The forecast path for the ONI is to just reach the La Nina threshold this fall before turning back into neutral territory. The temperature deviation reading this week was +0.1° C from normal.

    Grain Use. U.S. wheat export sales were only 5 million bushels for the week of July 27th. A sales pace of 14 million per week is needed to reach the current marketing year target of 975 million bushels. This year’s cumulative sales of 38% of the marketing year target are right at where we normally are at the end of July. Mexico continues to be the top buyer of U.S. wheat with the Philippines moving ahead of Japan into the number two position.

    Commitment of Traders. Money managers were still net long last week in the Commitment of Traders Report from the CFTC, but less so by 59,352 contracts. Longs held about steady in corn and soybeans but an increase in short contracts held lowered net longs by 25,235 and 9,437. Net longs were down and shorts were up in both Chicago and Kansas City wheat contracts. Minneapolis wheat was virtually unchanged. Prices were down for the week except for Minneapolis wheat which was up ½ cent.

    The basis for Texas wheat continues to run weaker than normal, an indicator that supplies are more than adequate given the current level of demand. For the week of August 3, the average Texas cash wheat basis is -57 cents and the basis for wheat delivered to the Texas Gulf is +38 cents. The average basis for cash wheat at the elevator in August is -44 cents and the average basis at the gulf is +60 cents.

    Marketing Strategies

    2018 Wheat Marketing Plan. Preliminary budgets for my 2018 wheat crop show I need $3.97 per bushel to cover variable costs; $5.74 to cover total costs. Newly formatted budget spreadsheets are available here.

    Those kinds of numbers do not indicate to me that we will see a significant rebound in U.S. wheat acres next year. I am 20% priced on the 2018 crop and expect to add to that total when we get a better handle on acres and yield prospects.

    Upcoming Reports/Events.
    August 10 – Crop Production and WASDE
    September 18-20 – Master Marketer, Castroville, Texas

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