Welch on Wheat: World Carryout Lowered, Still at 20 Year High

    Market Situation

    WASDE. No changes were made to U.S. wheat supply or use numbers in this morning’s World Agricultural Supply and Demand Estimates. The season average farm price estimate for 2017/18 was reduced by 20 cents per bushel to $4.60. This reduction raised the estimated PLC payment to $0.90 per bushel.

    World wheat carryout for 2017/18 was reduced from a 131-day supply to 130 days, still the largest since the late 1990s. The size of the wheat crop in Russia increased by 3.5 mmt but this was offset somewhat by smaller crops in Australia (-1 mmt), Europe (-0.69 mmt), and a lower beginning stock estimate (-2.7 mmt). The net was a supply decrease of 1.1 mmt. Use was up 0.5 mmt which lowered global ending stocks by 1.5 mmt.

    Weather. The precipitation forecast includes diminishing effects of Hurricane Irma on the eastern Corn Belt and improved rainfall prospects for the northern High Plains. Warmer than normal temperatures are expected for most of the country, especially the central portion of the High Plains, where it has been drier than normal in Kansas, eastern Colorado and northern Oklahoma.

    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. The average forecast of models from the International Research Institute for Climate and Society predicts ENSO-neutral for the remainder of the year and into early 2018.

    The National Centers for Environmental Prediction Climate Forecast System favors La Nina this fall and winter. The Australian Bureau of Meteorology notes in today’s ENSO update that 2 of its 8 models approach La Nina thresholds by the end of the year.

    The official ENSO outlook is inactive meaning there is little sign of El Nino or La Nina developing in the coming months. This week’s temperature deviation reading was -0.6°C from normal.

    Grain News on AgFax

    Marketing Strategies

    2018 Wheat Marketing Plan. We are nearing the end of 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 22 – Cattle on Feed
    September 29 – Grain Stocks, Small Grains Summary
    October 12 – Crop Production and WASDE

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