Welch on Wheat: Crop Condition Down

Market Situation

Crop Progress: USDA released its first wheat condition survey of 2015 this week. In late November the crop condition score was 360, just above an average index of 355. As of April 5 the score was 331, just below the average of 341. Changes since November: very poor +3, poor +7, fair +4, good -12, excellent -2. 

The condition of the Texas wheat crop declined for the first time since January 25th this week, the crop condition index falling to 350 from 356, still well above average. As of April 5, wheat rated very poor was 3% (+1), poor 8% (+1), fair 35% (-1), good 44% (+1), and excellent 10% (-2). The wheat condition rating index in Oklahoma declined 2 points this week with a 1% increase in the poor category and a 1% decline in the good. The Kansas index fell 15 points with a 2% increase in very poor, 4% increase in poor, 5% decline in good, and 1% decline in excellent. The wheat crop condition index for these three Southern Plains states is down from 329 to 318.

Nebraska conditions fell slightly with a 1% increase in fair and a 1% decrease in good.

The Texas top soil moisture condition report shows 35% of the state in very short or short moisture conditions, up from 30% last week. Soils in West Texas, the Panhandle, and Rolling Plains were drier this week, mostly steady elsewhere.

Weather: The weekly Drought Monitor shows persistent dry conditions across much of the winter wheat production areas of Texas and Oklahoma. Over the last 7 days, more of Nebraska and the Dakotas have joined Kansas in the Moderate Drought category.

Precipitation over the last 30 days has measured less than ½ inch in much of the Central Plains. The 7-day rainfall outlook is for most of this same area to remain dry.

The El Nino/Southern Oscillation (ENSO) Diagnostic Discussion from the Climate Prediction Center of the National Weather Service this week confirmed that we are in an El Nino situation, five consecutive overlapping 3-month seasons above the sea surface temperature threshold of +0.5°C from normal.

Commitment of Traders: Last week’s Commitment of Traders report showed only slight adjustments in net long positions after the release of the Prospective Plantings and Grain Stocks reports on the 31st. It appears investors were not sufficiently swayed by those numbers to take new positions at the end of the quarter and ahead of the Easter weekend.

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 4½ cents, putting carry at 37% (in the neutral range, with <33% bullish and >66% bearish).

Marketing Strategies

2015 Wheat Marketing Plan: With a 65% revenue protection crop insurance policy in place, I am ready to price an additional 20% of the 2015 crop on this price move. That will bring me to 60% sold. If production prospects look favorable, I am prepared to price up to 80% before harvest.

Upcoming Reports/Events

  • April 9 WASDE
  • April 24 McLennan County Small Grain Tour, McGregor
  • April 30 Concho/McCulloch County Wheat Tour, Millersview
  • May 1 Taylor/Callahan County Wheat Field Day, Abilene and Eula
  • May 5 & 6 Grain Grading Workshop, Amarillo
  • May 12 WASDE, first estimates of the 2015/16 marketing year

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