Welch On Wheat: We’re In A Price-Discovery Phase

    The U.S. spring wheat crop condition index slipped 1 point this week to 273: very poor increased 2 points, poor down 3, good up 2, and excellent down 1. The average index rating for the U.S. spring wheat crop at this point in the season is 372.

    South Dakota spring wheat rated very poor and poor held steady at 75%, Montana 63% in those same categories (+0%), and North Dakota at 38% (-2%). Spring wheat harvested this week is 40%, just ahead of the five-year average of 35%.


    Along with persistent drought conditions in the Northern Plains, portions of Iowa this week moved into the extreme drought category. Much of the Corn Belt is expected to receive rain over the next 5 days with temperatures back to about normal to slightly below.

    Precipitation Forecast

    The Oceanic Nino Index from the Climate Prediction Center continues to forecast neutral conditions for late summer through next winter. This week’s temperature deviation reading was -0.2° C from normal.

    The seasonal weather outlook updated yesterday (8/17/2017), which combines long-term trends, soil moisture, and ENSO, shows warmer than normal temperatures across the U.S. in September/October/November with above normal precipitation from Texas across the southeast.

    Commitment of Traders.

    Money managers were more bearish in their holdings post-WASDE as reflected in today’s Commitment of Traders Report from the CFTC. In every contract tracked here, long contracts held decreased compared to the week before and short positions held increased.  Prices were down in all five contracts as well.  Traders are net short in both soybeans and soft red winter wheat.

    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 17, the average Texas cash wheat basis is -58 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. We are in the price discovery period when RMA sets the base price for most 2018 winter wheat products. At current futures prices in the July 2018 Kansas City wheat contract, the base price is above last year but still in the lower ranges of the last 10 years.

    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.

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