Welch on Wheat: Stocks Below Last Year but Above Average

Market Situation

Small Grains Summary. Ahead of last Friday’s Small Grains Summary, the average trade guess was for USDA to lower 2017/18 wheat production. Instead, production increases in the spring wheat crop resulted in a small increase in wheat production compared to the September WASDE: 1.741 billion bushels versus 1.739 billion, +2 million bushels.

Grain Stocks. All wheat in all positions in the Grain Stocks report was 2.253 billion bushels. This amount is 11 percent below the stocks held on September 1, 2016 but still 7 percent above the most recent five-year average. Again, this number was higher than the average of trade expectations ahead of the report of 2.205 billion bushels.

Weather. The portion of the Southern High Plains in some degree of drought increased from 24% to 29% last week. Conditions improved somewhat in Kansas but abnormally dry areas expanded from Central Texas across western Arkansas. The drought severity and coverage index (DSCI) for the Southern Plains increased from 28 to 33 this week, still well below an average reading for late September.

The precipitation forecast this week shows good rainfall coverage for eastern New Mexico, the Texas Panhandle, Rolling Plains, North Texas, Oklahoma, and Kansas. The La Nina Watch continues in this week’s Oceanic Nino Index update from the Climate Prediction Center.

The latest weekly temperature deviation reading was -0.2°C from normal and the average of forecast models shows La Nina development this fall lasting into late spring. La Nina conditions increase the likelihood of a warmer and drier than normal fall and winter in the Southern High Plains.

Grain News on AgFax Unable to display feed at this time.

Commitment of Traders. Money managers ended the last Tuesday in September (end of the month, end of the quarter) on a more bullish note. Short contracts held went down and long contracts went up for corn, soybeans, and soft wheat. Shorts went down in hard red winter wheat also but so did long positions.

Marketing Strategies

2018 Wheat Marketing Plan. 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.