Welch on Wheat: Export Sales Continue at Strong Pace

Market Situation

Crop Progress. The U.S. spring wheat crop condition index this week is down only one point to 277 with 96% of the crop headed out. The poor category decreased 1 point, fair was up 2, and excellent down 1. South Dakota spring wheat rated very poor and poor is up to 76% (+2%), Montana 55% in those same categories (-2%), and North Dakota at 39% (-1%).

Weather. Drought conditions worsened in the northern high plains last week as parts of Montana and North Dakota were classified in the exceptional drought category.

The precipitation forecast for the next 5 days offers relief for southeast South Dakota into northern Nebraska and Iowa. The temperature outlook shows more moderate levels for most of the Corn Belt with the High Plains experiencing readings hotter than normal.

The Oceanic Nino Index from the Climate Prediction Center is forecast to continue on the edge of El Nino-Neutral for the rest of the summer. The temperature reading this week was 0.4° C above normal. The seasonal temperature deviation is currently forecast to drop off in early fall.

Grain Use. U.S. wheat export sales were 25 million bushels for the week of July 13th. A sales pace of 14 million per week is needed to reach the marketing year target of 975 million. Mexico continues to be the top buyer of U.S. wheat, but the Philippines moved ahead of Japan this week into the number two position.

Commitment of Traders. Money managers were still net long last week in the Commitment of Traders Report from the CFTC, with mostly minor position changes reported. The biggest change was a decrease in shorts in the soybean contract of 20,723, which, when combined with a 3,350 increase in longs, resulted in a net gain of 24,073 long positions.

Grain Commentary

Long contracts held were down in corn, Chicago wheat, and KC wheat. Prices in the nearby futures contracts last Tuesday were lower across the board.

The spread between the September and December Kansas City wheat futures contracts is 27 cents. This amount is above full carry for that 90 day period (3 months x 6 cents per bushel/month = 18 cents). Any percentage of carry above 67% is generally considered a bearish commercial market indicator.

Marketing Strategies 2018

Wheat Marketing Plan. I have completed all my sales of 2017 wheat and am 20% priced on 2018.

Upcoming Reports/Events.
August 10 – Crop Production and WASDE
September 18-20 – Master Marketer, Castroville, Texas

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