Welch on Wheat: Crop Conditions Continue to Improve

Market Situation

Crop Condition. The condition of the Texas wheat crop continues to improve at levels much better than average according to the “Texas Crop Progress and Condition” reports. As of March 22, only 10% of Texas wheat was in the very poor to poor condition, down from 11% the week before. A year ago, 45 to 50% of the state’s wheat crop was in very poor or poor condition.

This week’s ratings saw a 1% decline in the poor, 3% decline in the fair, a 3% increase in the good, and a 1% increase in wheat rated as excellent.

Wheat condition ratings in Oklahoma improved this week where there was a 1% decline in the poor category, a 3% decline in fair, a 3% increase in good, and a 1% increase in excellent.
Kansas wheat conditions declined: very poor, +1%; poor, +3%; fair, -4%; good, -1%; excellent, +1%.

The wheat crop condition index for these three Southern Plains states was down 1 point on the week, from 330 to 329.

The Texas top soil moisture condition report shows 22% of the state in very short or short moisture conditions. This is down from 23% of the state acreage last week and down from 42% in mid-January.

Weather. Rainfall totals since the first of March have been less than ½ inch in much of Nebraska, Kansas, southeast Colorado, and the Texas and Oklahoma Panhandles. That situation is not forecast to change through the end of the month.

The El Nino/Southern Oscillation (ENSO) Diagnostic Discussion from the Climate Prediction Center of the National Weather Service this week continues to show an emerging El Nino situation. The influence of this weather pattern can be seen in the longer term seasonal outlooks.

Commitment of Traders. Last week’s Commitment of Traders report showed a significant increase in the net short positions of hedge funds, an increase in open interest, and a lower price index, an indication of new selling in the grain complex. Hedge funds were actually less bearish in the wheat markets but much more strongly so in corn. It will be interesting to see the degree to which these conditions changed in this Friday’s release given the late week rally in both stocks and commodities.

In the July 2015 Kansas City wheat contract, prices have rebounded from the contract low of 522¾ earlier this month. The spread between the old crop May Kansas City wheat contract and the new crop July is 5¾ cents, putting carry at 48% (in the neutral range, with <33% bullish and >66% bearish).

Marketing Strategies

2015 Wheat Marketing Plan. I have priced all the 2015 wheat called for in my marketing plan at this time. With a 65% revenue protection crop insurance policy in place, I intend to price at least another 20% this spring. If production prospects look favorable, I am prepared to price up to 80% before harvest.

Upcoming Reports/Events.
March 27 – Quarterly Hogs and Pigs
March 31 – ARC/PLC decision at FSA; Grain Stocks; Prospective Plantings
April 6 – USDA Crop Progress reports resume
April 7 – Short-term Energy Outlook, Energy Information Administration
April 9 – WASDE

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