Tuesday, June 24, 2014
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Welch on Wheat: Crop Condition Unchanged with 33% Harvested

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Market Situation

Crop Progress. Crop conditions in winter wheat continue to stabilize with crop maturity (96% headed, 33% harvested). The U.S. winter wheat crop condition index (very poor=1, poor=2, fair=3, good=4, excellent=5) is 269 this week, unchanged from the last three weeks. Average for this time in the season is 326.

In Texas, the crop condition index score increased 1 point to 223 as 1% moved from the very poor category to the poor. The average Texas wheat crop condition index at harvest is 289.

The percent of wheat in Kansas and Oklahoma rated as very poor and poor this week is 62% (down from 63%) and 76% (unchanged).

The spring wheat crop continues its favorable condition rating this week, 71% good and excellent, down from 72% last week and 70% last year.

Weather. Recent rains have brought much of the eastern 2/3rds of the country back up near normal levels of precipitation for the months of May and June.

Much of this same area is expected to receive additional precipitation in the 7-day Total Precipitation Forecast.

Longer term, models from the Climate Prediction Center forecast an 80% chance of an El Nino event later this fall. The most recent weekly sea surface temperature departure in the El Nino/La Nina critical region (region 3.4, along the equator between the international dateline and the western coast of South America) is 0.5°C, right at the El Nino threshold of +0.5°C.

Commitment of Traders. Hedge funds continued to build positions on the short side of the grain market last week. Friday’s Commitment of Traders report from the CFTC showed net longs by this class of investors down to 22,688 contracts, down from 79,720 the week before and over 371,000 net long contracts in early April. Index funds continue to hold steady at about 740,000 net long positions. The price index fell another 24 points last week, down to 710, the lowest since 705 on February 11 (when net longs of 29,229 were about where we are now).

Marketing Strategies

2014 Wheat Marketing Plan. I completed by 2014 wheat marketing at harvest last week (June 18th). I sold my remaining cash wheat and offset my hedged futures contracts. The only settlement piece I am waiting on is the wheat harvest price for insurance purposes. This price is calculated as the average closing price of the July Kansas City wheat futures contract for the month of June. At present, that average price is $7.17 per bushel.

Upcoming Reports/Events.

June 27 – Quarterly Hogs and Pigs report
June 30 – Crop Progress, Acreage, Grain Stocks
July 7 – Crop Progress
July 11 – WASDE

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