Market Situation
WASDE. The U.S. wheat supply numbers in today’s World Agricultural Supply and Demand Estimates were given last month in the Small Grains Summary: a small decrease in harvested area and a 0.7 bushel per acre increase in yield. This production gain was offset by a slightly small carryover number from 2016/17.
On the use side of the balance sheet, wheat for feed in the current marketing year was cut by 30 million bushels, most likely because of plentiful feed grain stocks.
With no other changes, this number raised the ending stock estimate and stocks to use ratio. Price forecast numbers were unchanged.
World wheat supplies increased 7 mmt primarily on larger crops in Europe, India, and Russia. With only a 2 mmt increase is use, the increase in ending stocks raised the estimated days of use on hand at the end of the marketing year from a 130-day supply to 132 days.
Crop Progress. The crop monitor for October from GEOGLAM shows mixed conditions from all major production areas of spring and winter wheat. In the northern hemisphere, Canadian spring wheat harvest continues under poor conditions while U.S. winter wheat conditions are mostly favorable for planting.
Winter wheat sowing in Eastern Europe is impacted by drought in parts of Ukraine and southern Russia. Spring wheat yields in Kazakhstan are expected to be below last year but still above the five-year average. Australian wheat conditions have improved some of late but will still be impacted by drought conditions in September.
In Argentina, flooding in the south is expected to reduce planted area and affect crop development.
Weather. The portion of the Southern High Plains in some degree of drought decreased from 25% to 21% this week. The driest areas of this region are western Arkansas, southeast Oklahoma, northeast Texas, and parts of South Texas. Conditions have improved considerably in Kansas. The drought severity and coverage index (DSCI) for the Southern Plains decreased from 32 to 27 this week, well below an average reading for October.
The precipitation forecast this week shows good rainfall coverage from southwest Oklahoma, across eastern Kansas and northeastward from there.
The La Nina Watch continues in this week’s Oceanic Nino Index update from the Climate Prediction Center. The latest weekly temperature reading was normal, 0°C deviation, and the Oceanic Nino Index for July/August/September was -0.1°C. 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.
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Commitment of Traders. Money managers started off the fourth quarter of 2017 little changed in commodity sentiment from September. This class of traders was slightly more bearish corn, less bullish soybeans, less bearish soft red winter wheat, and less bullish hard red winter wheat. Prices were lower for each commodity.
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.
