Welch on Wheat: Strong Exports Continue

Photo by MSU Extension Service/Kevin Hudson

Market Situation

Crop Progress. Spring wheat harvest has reached 89% according to this week’s Crop Progress from USDA. The five-year average for this week of the season is 78% harvested. USDA is currently surveying small grains producers and will provide updated production estimates in the September WASDE on the 12th and Small Grains Annual Summary on September 29th.

The global crop monitor from GEOGLAM shows mixed conditions for wheat around the world: good to exceptional for much of Russia and Kazakhstan to poor in the U.S. Northern High Plains. In the Southern Hemisphere, much of Australia has been dry and wet weather is a concern for early wheat development in Argentina.

Weather. Persistent drought conditions remain over much of the Northern High Plains. The portions of Iowa rated as extreme drought held about steady this week with some relief in the northwestern part of the state. Conditions improved somewhat in eastern South Dakota and held about steady in Nebraska. As fall wheat seeding begins, much of central Kansas is in moderate drought.

Hurricane Irma is the dominant feature of both the precipitation and temperature outlook for the next week. Cooler than normal temperatures will accompany heavy rainfall all across the southeast and into the eastern Corn Belt.

This week’s Oceanic Nino Index from the Climate Prediction Center shows a moderate dip into La Nina territory late this fall and early winter before turning back to neutral conditions in early spring. This week’s temperature deviation reading was -0.2°C from normal, the same as the trimonthly reading for June/July/August.

Grain Use. All wheat export sales for the week of August 31 were 14 million bushels and the total so far this marketing year, 458 million bushels. This number is 47% of the projected marketing year total. Normally by the end of August, 45% of the yearly total is on the books. The biggest sales recorded for this week were Korea, Nigeria, Japan, and the Philippines.

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The Texas Gulf is the second largest exporting region for wheat in the U.S., behind the Pacific Northwest. The Texas Gulf accounted for 20% of all U.S. wheat exports in 2016. Hurricane Harvey brought a halt to all rail traffic along the coast and the Port of Houston closed Friday August 25th.

The port reopened on a limited basis on September 1. Export inspections had been running at about the same level as last year and the five-year average right up to the storm. For the first reporting week after the storm, August 31, export inspections were 0.

Commitment of Traders. Money managers were generally more bearish in their holdings in grain this week, still net short but somewhat less bearish in beans. The positive price movement this week is due to the nearby contracting rolling over from September to December for corn and wheat and the wide spread between futures contract prices.

The basis for Texas wheat continues to run weaker than normal, an indicator that supplies are more than adequate given the current level of demand. For the week of September 7, the average Texas cash wheat basis is -71 cents and the basis at the Texas Gulf +11 cents.

Marketing Strategies

2018 Wheat Marketing Plan. We are in the price discovery period when RMA sets the base price for most 2018 winter wheat products. At current futures prices in the July 2018 Kansas City wheat contract, the base price is above last year but still in the lower ranges of the last 10 years.

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.

Upcoming Reports/Events. 
September 12 – Crop Production and WASDE
September 29 – Small Grains Summary
September 18-20 – Master Marketer, Castroville, Texas


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