Wheat Outlook November 2, 2018 Volume 27, Number 69

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1 Today s Newsletter Market Situation Crop Progress 1 Weather 3 Grain Use 5 Commitment of Traders 5 Texas Cash Wheat s 6 Market Situation Crop Progress. The Crop Progress report for October 29 showed 78 percent of the winter wheat crop sown, just below the fiveyear average of 85 percent. Wet conditions have delayed planting in the Southern High Plains, but good moisture and better prices should result in higher acreages of wheat this winter. Compared to five-year averages, Kansas is 13 percent behind, Oklahoma behind 1 percent, and Texas down 8 percent. Monday s report included the first crop condition ratings of the 219 wheat crop. Both U.S. and Texas conditions start off the season just below long-term index averages. Marketing Strategies Seasonal Index 7 % U.S. Winter Wheat Crop Condition Ratings CCI Wheat Marketing Plan Upcoming Reports/Events Oct 4-Nov 11-Nov 18-Nov 25-Nov 2-Dec 9-Dec 16-Dec 23-Dec 3-Dec 6-Jan 13-Jan 2-Jan 27-Jan 3-Feb 1-Feb 17-Feb 24-Feb 3-Mar 1-Mar 17-Mar 24-Mar 31-Mar 7-Apr 14-Apr 21-Apr 28-Apr 5-May 12-May 19-May 26-May 2-Jun 9-Jun 16-Jun 23-Jun 3-Jun 7-Jul Very Poor Poor Fair Good Excellent 219 Average USDA Crop Progress, October 29, 218 Globally, wheat crop conditions are mostly favorable. Wet conditions causing harvest delays of spring wheat in Canada may yet lower production estimates. Dry conditions in eastern Australia may lower production further in that country, despite much more favorable conditions in the west ( 1

2 219 Texas Winter Wheat Condition Ratings % CCI /28 11/4 11/11 11/18 11/25 12/2 12/9 12/16 12/23 12/3 1/6 1/13 1/2 1/27 2/3 2/1 2/17 2/24 3/3 3/1 3/17 3/24 3/31 4/7 4/14 4/21 4/28 5/5 5/12 5/19 5/26 6/2 6/9 6/16 6/23 6/ Very Poor Poor Fair Good Excellent 219 Average USDA Crop Progress, October 29, 218 2

3 Weather. The drought situation in the Southern Plains improved again this week. As of October 3, 95 percent of the Southern Plains Climate Hub was drought free. The drought index is 7 this week down from 11 the week before, and below the 27 of last year and a five-year average of 91. Drought Monitor, 11/1/218, Southern Plains Climate Hub, Southern Plains Drought Monitor, 1/3/218 % DSCI DO D1 D2 D3 D4 DSCI 5-yr avg DSCI DSCI 217/18 Drought Severity and Coverage Index (DSCI) = (DO*1)+(D1*2)+(D2*3)+(D3*4)+(D4*5); min --no drought conditions reported; max 5--1% under exceptional drought conditions Drought Monitor, 11/1/218, Southern Plains Climate Hub, 3

4 The seven-day forecast shows clearing weather/light rain over much of the Southern High Plains which should open the door for field work to resume. Heavy rain will impact fall harvest and winter wheat seeding for much of the eastern half of the country. The ENSO update this week continues the El Nino watch. There is a 7-75% chance of El Niño development during the Northern Hemisphere winter This week s sea surface temperature departure from normal is +1.1 C. The forecast path of temperature deviations reaches the El Nino threshold by the end of this month. Oceanic Nino Index (ONI) The CFS.v2 ensemble mean (red line) predicts El Nino to form soon and then continue through at least Northern Hemisphere winter Issued 28 October 218 C National Centers for Environmental Prediction Climate Forecast System Version 2 Actual Measurements Predicted El Nino 1..5 Latest actual weekly SST departure Neutral. -.5 La Nina NDJ DJF '18 JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '19 4 JFM FMA MAM AMJ MJJ El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, October 29, 218

5 Grain Use. Wheat export sales commitments were better this week. For the week of October 25, sales of 21 million bushels were recorded, above the 18 million bushel pace to achieve USDA s marketing year target. For the year so far, sales still lag a normal level, 47 percent of the total sold so far this year compared to 62 percent booked in a normal year by this time. Mil bu 1, 218/19 U.S. All Wheat Export Sales Commitments Projected MY Total Cumulative Net Sales 2 Weekly Net Sales Pace to reach the target: 18 Export Sales Commitments for the week 1/25/218: 21 million bushels Total Export Sales Commitments this marketing year: 481 million bushels 47% of the 218/19 MY Export Sales Target of 1,25 million bushels (October WASDE) Average pace of export sales by the end of October: 62% USDA, Foreign Agricultural Service: November 1, 218 Commitment of Traders. The last numbers for October show a decline in net long contract holdings in corn, soybeans, and wheat and lower prices across the board. The biggest change was in soybeans where net longs fell by 32,676 contracts. This was followed by declines in wheat of 12,559 contracts for soft wheat and 11,12 in hard red wheat. Corn net longs were down, but by a much smaller amount, only 816 contracts. Non-commercial net long positions 1/9 1/16 1/23 1/3 Net Longs Change Change Corn 65,935 19, ,28 122,464 (816) (5.5) Soybeans (41,294) (29,774) (31,539) (64,215) (32,676) (24.) Chicago Wheat 32,929 32,885 2,328 7,769 (12,559) (9.25) KC Wheat 4,234 41,157 36,879 25,759 (11,12) (12.75) Total 97,84 153, ,948 91,777 (57,171) 5

6 Contracts 5, 4, 3, 2, 1, (1,) 2-Jan-18 Non-commercial Investment in Corn 16-Jan-18 3-Jan Feb Feb Mar Mar-18 1-Apr Apr-18 8-May May-18 Net Long 5-Jun Jun-18 3-Jul-18 CFTC Legacy Report, Futures Only, 11/2/ Jul Jul Aug Aug Sep Sep-18 9-Oct-18, /bu 23-Oct Contracts 25, 2, 15, 1, 5, (5,) (1,) Non-commercial Investment in Soybeans 2-Jan Jan-18 3-Jan Feb Feb Mar Mar-18 1-Apr Apr-18 8-May May-18 Net Long 5-Jun Jun-18 3-Jul-18 CFTC Legacy Report, Futures Only, 11/2/ Jul Jul Aug Aug Sep Sep-18 9-Oct-18, /bu 23-Oct-18 1,1 1,5 1, Contracts 1, 8, 6, 4, 2, (2,) (4,) (6,) (8,) (1,) 2-Jan-18 Non-commercial Investment in Wheat 16-Jan-18 3-Jan Feb Feb Mar Mar-18 1-Apr Apr-18 8-May May-18 Net Long 5-Jun Jun-18 3-Jul-18 CFTC Legacy Report, Futures Only, 11/2/ Jul Jul Aug Aug Sep Sep-18 9-Oct-18, /bu 23-Oct Contracts 85, 75, 65, 55, 45, 35, 25, 15, 5, (5,) 2-Jan-18 Non-commercial Investment in KC Wheat 16-Jan-18 3-Jan Feb Feb Mar Mar-18 1-Apr Apr-18 8-May May-18 Net Long 5-Jun Jun-18 3-Jul-18 CFTC Legacy Report, Futures Only, 11/2/ Jul Jul Aug Aug Sep Sep-18 9-Oct-18, /bu 23-Oct Texas Cash Wheat s. Avg TX cash TX Gulf cash-gulf wheat basis export bid basis spread October (.29) October (.27) October (.24) October (.28) November (.29) year November average (.53) USDA, AMS, Market News: TX cash = average (area North of the Canadian River, Triangle Area from Plainview to Canyon to Farwell, area South of a Line from Plainview to Muleshoe) 6

7 Marketing Strategies Seasonal Index. The Seasonal Index for the July Kansas City wheat contract shows that the best pricing opportunities of the year often occur before we plant the upcoming crop. This is followed by some price strength again in March and May before falling off at harvest. These patterns form the foundation of my wheat marketing plan. Despite volatile prices either side of the average index, prices are generally following the seasonal pattern. Index July KC Wheat Seasonal Index July 219 Closing Futures May 12-May 23-May 3-Jun 14-Jun 25-Jun 7-Jul 18-Jul 29-Jul 9-Aug 2-Aug 31-Aug 11-Sep 22-Sep 3-Oct 14-Oct 25-Oct 5-Nov 16-Nov 27-Nov 8-Dec 19-Dec 31-Dec 12-Jan 23-Jan 3-Feb 14-Feb 25-Feb 7-Mar 18-Mar 29-Mar 9-Apr 2-Apr 1-May 12-May 23-May 3-Jun 14-Jun 25-Jun 7-Jul KW19N Updated 11/2/ Wheat Marketing Plan. I have priced about 1/3 of my expected 219 wheat crop. The first sale came on a price run up to about $6. in February. I added to that sales level when planting of the 219 crop got underway. I used an options based strategy on the second sale. I wanted a price floor but given the volatility in this market, wanted to maintain upside price potential. These are all the sales I intend to make until late winter/early spring. 7

8 July 219 KC Wheat and Marketing Plan /bu Early Season Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest /15/218: Hedged 17% at /4/218: Hedged 17% at /1/218 3/15/218 3/29/218 4/13/218 4/27/218 5/11/218 5/25/218 6/11/218 6/25/218 7/1/218 7/24/218 8/7/218 8/21/218 9/5/218 9/19/218 1/3/218 1/17/218 1/31/218 11/1/218 11/2/218 11/3/218 12/1/218 12/2/218 12/3/218 1/9/219 1/19/219 1/29/219 2/8/219 2/18/219 2/28/219 3/1/219 3/2/219 3/3/219 4/9/219 4/19/219 4/29/219 5/9/219 5/19/219 5/29/219 6/8/219 6/18/219 6/28/219 7/8/219 Upcoming Reports/Events November 8 WASDE Crop Production January 6-12, 219 Jan 22-Mar 7, 219 TEPAP The Executive Program for Agricultural Producers, Austin, TX Registration is now open. Master Marketer, Lubbock, TX Registration is now open. 8

9 Mark Welch, Texas A&M AgriLife Extension Economist 6 John Kimbrough Blvd, Suite 335 College Station, Texas Tel. (979) Fax. (979) JMWelch@tamu.edu The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas A&M AgriLife Extension Service. The author and Texas A&M AgriLife Extension Service assume no liability for the use of this newsletter. The Texas A&M AgriLife Extension Service provides equal access in its programs, activities, education and employment, without regard to race, color, sex, religion, national origin, disability, age, genetic information, veteran status, sexual orientation or gender identity. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating 9