Welch on Wheat: Export Pace Remains Strong

    Photo by MSU Extension Service/Kevin Hudson

    Market Situation

    Crop Progress. With the spring wheat harvest reaching 76%, USDA has suspended the weekly crop condition report. Harvest progress for the week of August 27 is ahead of the five-year average by 10 percentage points.

    USDA is currently surveying small grains producers and will provide updated production estimates in the September WASDE on the 12th and Small Grains Annual Summary on September 29th.

    Weather. Persistent drought conditions remain over much of the Northern High Plains. The portions of Iowa rated as extreme drought held about steady this week with some relief in the northwestern part of the state. Conditions improved somewhat in eastern South Dakota and held about steady in Nebraska.

    The five-day precipitation outlook shows only light rain for wheat growing areas of the High Plains, heavier concentration of showers in the eastern Corn Belt.

    The temperature outlook for the next week calls for cooler than normal temperatures in the south and eastern Corn Belt, warmer than normal conditions in the western corn growing regions and Plains states.

    This week’s Oceanic Nino Index from the Climate Prediction Center shows a moderate dip into La Nina territory late this fall and early winter before turning back to neutral conditions in early spring. This week’s temperature deviation reading was -0.1° C from normal.

    Grain Use. The most recent Flour Milling Products report shows wheat processing in 2017 running on par with 2016 but about 1 percent below the three-year average. Flour production in the second quarter of 2017 was higher than the same period a year ago, 104.403 million hundredweight versus 103.823 million, with the percent of whole wheat flour up from 5.0% to 5.1%.

    U.S. wheat for food use in the August WASDE for the 2017/18 marketing year was projected at 950 million bushels, about the same as 949 million in 2016/17 and down from 957 million bushels in 2015/16.

    Grain News on AgFax

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    All wheat export sales for the week of August 24 were 20 million bushels and the total so far this marketing year, 444 million bushels. This number is 46% of the projected marketing year total. Normally by the end of August, 45% of the yearly total is on the books.

    Commitment of Traders. Money managers were generally more bearish in their holdings this week, most notably the corn market, the exception being soybeans. For contracts other than corn, this week’s changes to net long positions were relatively minor as were the price adjustments.

    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 31, the average Texas cash wheat basis is -59 cents and the basis for wheat delivered to the Texas Gulf is +36 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.

    Upcoming Reports/Events
    September 12 – Crop Production and WASDE
    September 29 – Small Grains Summary

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