Wheat Outlook July 17, 2017 Volume 26, Number 41

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1 Today s Newsletter Market Situation Crop Progress 1 Weather 2 Grain Use 5 Market Situation Crop Progress. The U.S. spring wheat crop index this week is down another 5 points to 278. The very poor category increased 2 points, fair was down 1, and good down 1. South Dakota spring wheat rated very poor and poor is up to 74% (+2%), Montana 61% in those same categories (+9%), and North Dakota at 4% (+5%). 217 U.S. Spring Wheat Crop Condition Ratings Commitment of Traders 7 Marketing Strategies 218 Wheat Marketing Plan 1 Upcoming Reports/Events 1 % CCI Very Poor Poor Fair Good Excellent 217 Average USDA Crop Progress, In the July Crop Production report, USDA estimated a spring wheat yield of 4.3 bushels per acre in 217, down from 47.2 bushels last year and a trend line yield of 46.1 bushels. Bu per acre U.S. Spring Wheat Yields /12/217 Yield Trend 1

2 Weather. The northern high plains continue to experience the worst drought conditions in the country. The precipitation forecast for the next 5 days offers relief for the eastern 2/3rds of the Dakotas and dry areas of Nebraska. Rainfall this week across southern Minnesota/northern Iowa to southern Wisconsin/northern Illinois may aggravate flooding conditions along the Fox and Des Plaines Rivers. The Oceanic Nino Index from the Climate Prediction Center is forecast to continue in mostly neutral territory this summer into early fall. The temperature reading this week was.5 C above normal, with the seasonal high temperature deviation currently forecast for the end of the June/July/August period. Above normal temperatures are forecast to persist over the High Plains and extend to a lesser degree over much of the Corn Belt. 2

3 Precipitation Forecast ( Days 1-3 Days 4-5 Oceanic Nino Index (ONI) ENSO Alert System Status: Not Active ENSO-neutral conditions are present. Equatorial sea surface temperatures (SSTs) are near-to-above average across the central and east-central Pacific Ocean. ENSO neutral is favored (5 to ~55% chance) into the Northern Hemisphere winter C Actual Measurements Predicted El Nino 1..5 Latest actual weekly SST departure Neutral. -.5 La Nina JAS ASO SON OND NDJ DJF '17 El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '18 JFM FMA 3

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5 Grain Use. The U.S. wheat export target was lowered from 1 billion bushels to 975 million in the July WASDE. Early marketing year sales are on target to reach that objective. The weekly average so far this year is 16 million bushels with a sales pace of 14 million per week needed to reach 975 million. China, the second largest wheat producer in the world behind the EU, is expected to continue to import high-protein wheat due to demand growth from an expanding middle class (Grain and Feed Annual, Beijing, China, 4/4/217). Mil bu 1, 217/18 U.S. All Wheat Export Sales Commitments Projected MY Total Cumulative Net Sales Top Importers, Current MY, mil bu. Mexico 47 16% Japan 31 11% Phillipines 33 11% Korea 25 8% Nigeria 16 6% China 14 5% Taiwan 11 4% Thailand 1 3% Algeria 9 3% Weekly Net Sales Sales pace to reach target: 14 Export Sales Commitments for the week 7/6/217: 13 million bushels Total Export Sales Commitments this marketing year: 322 million bushels 3% of the 217/18 MY Export Sales Target of 975 million bushels (July WASDE) Normal sales commitments by the end of July: 37% USDA, Foreign Agricultural Service: July 13, 217 Though not a U.S. wheat customer, India (the world s fourth largest wheat producer) again is expected to import wheat despite favorable crop conditions in 217. According to USDA, imports are cheaper for wheat users along the coast due to high inland freight costs (India Grain and Feed Update, 4/28/217) and food demand is strong (Grain: World Markets and Trade, July 217). 5

6 MT China s Wheat Trade 8, 7, 6, 5, 4, 3, 2, 1, Exports Imports Source: USDA, Foreign Agricultural Service, PS&D, 7/12/217 MT India s Wheat Trade 8, 7, 6, 5, 4, 3, 2, 1, Exports Imports Source: USDA, Foreign Agricultural Service, PS&D, 7/12/217 6

7 Commitment of Traders. Money managers were net long last week ahead of Wednesday s WASDE report. Longs increased and shorts decreased for corn, soybeans, Chicago wheat, and Kansas City wheat. Only Minneapolis wheat, the grain contract at the heart of current drought concerns, saw a decrease in long contracts held and an increase in short positions. Prices in the nearby futures contracts on Tuesday were higher for corn and soybeans but lower in the wheat contracts, especially Minneapolis. weekly contract Managed Money, net long positions 27-Jun 3-Jul 11-Jul change Corn (15,57) (37,67) 115,66 152, weekly price change Soybeans (125,912) (82,63) 7,212 89, Chicago Wheat (1,437) 23,997 53,971 29,974 (2.) KC Wheat 44,124 54,574 72,845 18,271 (2.) Minn Wheat 14,73 13,59 1,889 (2,62) (19.25) Total (183,65) (28,157) 259, ,14 Speculative Investment in Corn Net Long Contracts 15, 1, 5, (5,) (1,) (15,) (2,) (25,) Price, /bu Net Long Price 7

8 Speculative Investment in Soybeans Net Long Contracts 25, 2, 15, 1, 5, (5,) (1,) (15,) Price, /bu Net Long Price Speculative Investment in Chicago Wheat Net Long Contracts 1, 5, (5,) (1,) (15,) (2,) Price, /bu Net Long Price 8

9 Net Long Contracts 8, 7, 6, 5, 4, 3, 2, 1, (1,) (2,) (3,) Speculative Investment in KC Wheat 6-Sep 2-Sep 4-Oct 18-Oct 1-Nov 15-Nov 29-Nov 13-Dec 27-Dec 1-Jan 24-Jan 7-Feb 21-Feb 7-Mar 21-Mar 4-Apr 18-Apr 2-May 16-May 3-May 13-Jun 27-Jun 11-Jul Price, /bu Net Long Price The spread between the September and December Kansas City wheat futures contracts is 26¼ cents. This amount is above full carry for that 9 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. III Qtr Jul 17-Jul net change % change SEP 17 KC Wheat (.53) -9.47% DEC 17 KC Wheat (.515) -8.81% Difference % Carry 138% 146% 8% SEP to DEC JUL 18 KC Wheat (.3775) -6.19% 9

10 Marketing Strategies 218 Wheat Marketing Plan. I have completed all my sales of 217 wheat and am 2% priced on 218. July 218 KC Wheat and Marketing Plan /bu Early Season Price Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest /12/217: Sold 2% at 67½ Upcoming Reports/Events. Registration now open for Master Marketer, brochure available at: Registration now open for TEPAP, brochure available at: July 21 August 1 September 18-2 October 2-3 October October 3-31 Cattle on Feed Crop Production and WASDE Master Marketer, Castroville, Texas 1

11 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 11