Wheat Outlook September 28, 2018 Volume 27, Number 61

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1 Today s Newsletter Market Situation Grain Stocks 1 Small Grains Summary 1 Crop Progress 1 Weather 1 Market Situation Grain Stocks. All wheat in all positions was reported this morning in the Grain Stocks report at billion bushels. This is up 5 percent compared to last year and up 11 percent over the most recent five-year average. mil bu 2,5 2, 2,379 U.S. Wheat Stocks Grain Use 4 Commitment of Traders 5 1,5 1, 5 5-year avg 217/18 218/19 Texas Cash Wheat s 6 USDA, NASS 9/28/218 1-Sep 1-Dec 1-Mar 1-Jun Marketing Strategies Seasonal Index Wheat Marketing Plan 7 Upcoming Reports/Events 8 Small Grains Summary. Today s Small Grains Summary shows all wheat production numbers very close to those in the September WASDE. Acres planted and harvested were unchanged while the yield estimate increased from 47.4 bushels per acre to This.2 bushel increase raised the production estimate about 7 million bushels. Crop Progress. This week s Crop Progress puts winter wheat sowing at 28 percent, very close to the five-year average of 26 percent. The only major wheat state significantly off the normal pace is Montana with 8 percent planted versus a five-year average of 44 percent. Weather. The drought situation in the Southern Plains improved again this week as the area in some degree of drought classification dropped another 14 points down to 36. The drought index of 62 this week is not as good as last year s 38, but is below the five-year average of 15. 1

2 Southern Plains Drought Monitor, 9/25/218 % 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, 9/27/218, Southern Plains Climate Hub, 2

3 The five-day precipitation forecast favors some of the areas of central to northeastern Kansas that continue in severe to extreme drought conditions. Lighter amounts to dry conditions cover most of the rest of the Southern Plains. The ENSO update this week continues the El Nino watch. There is a 55-6% chance of El Niño in the Northern Hemisphere fall 218 (September-November), increasing to 65-7% during winter This week s sea surface temperature departure from normal is steady +.3 C. The forecast path of temperature deviations reaches the El Nino threshold by the end of November. Oceanic Nino Index (ONI) The CFS.v2 ensemble mean (red line) favors El Nino forming in the next few months and continuing through winter Issued 23 September 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 OND NDJ DJF '18 JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '19 JFM FMA MAM AMJ El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, September 24,

4 The seasonal outlook for October-December, which accounts for ENSO effects, shows moisture probabilities above normal through the end of the year in Alaska, across the South, and up the Atlantic seaboard. Temperatures are expected to be above normal virtually nationwide. Grain Use. Wheat export sales commitments picked up for the week of September 2. Reported sales of 24 million bushels are above the 17 million bushel pace needed to reach the current marketing year target of 1.25 billion bushels. Top buyers for the week reported were Japan (5.168 mil bu), Philippines (3.467 mil bu), and Mexico (3.348 mil bu). Cumulative sales stand at 37 percent of the marketing year forecast. Normally by the end of September, 55 percent of sales for the year are on the books. 4

5 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: 17 Export Sales Commitments for the week 9/2/218: 24 million bushels Total Export Sales Commitments this marketing year: 399 million bushels 39% of the 218/19 MY Export Sales Target of 1,25 million bushels (September WASDE) Average pace of export sales by the end of September: 55% USDA, Foreign Agricultural Service: September 27, 218 Commitment of Traders. The Commitment of Traders report for positions on Tuesday, September 25, shows very little change in the wheat markets but a more bullish outlook for corn and soybeans. Long contracts held went down, however, in both corn and soybean contracts but this was outpaced by the decline in short contracts. After a week net short, corn made a swing back over to net long on Tuesday. s on Tuesday were higher in all nearby contracts. Non-commercial net long positions 9/4 9/11 9/18 9/25 Net Longs Change Change Corn 71,885 69,28 (14,515) 9,497 24, Soybeans (55,657) (66,552) (69,526) (54,861) 14, Chicago Wheat 6,599 45,523 36,629 36,56 (69) 1.25 KC Wheat 64,526 54,226 48,28 46,85 (2,123) 6. Total 141,353 12, ,281 36,

6 Contracts 5, Non-commercial Investment in Corn, /bu 42 Non-commercial Investment in Soybeans Contracts, /bu 25, 1,1 4, 3, 2, 1, , 15, 1, 5, (5,) 1,5 1, (1,) 3 (1,) 7 Net Long CFTC Legacy Report, Futures Only, 9/28/218 Net Long CFTC Legacy Report, Futures Only, 9/28/218 Contracts 1, 8, 6, 4, 2, (2,) (4,) (6,) (8,) (1,) Non-commercial Investment in Wheat, /bu Non-commercial Investment in KC Wheat Contracts, /bu 85, 6 75, 55 65, 55, 5 45, 45 35, 25, 4 15, 35 5, (5,) 3 Net Long CFTC Legacy Report, Futures Only, 9/28/218 Net Long CFTC Legacy Report, Futures Only, 9/21/218 Texas Cash Wheat s. Avg TX cash TX Gulf cash-gulf wheat basis export bid basis spread 8/3/ (.15) /6/ (.28) /13/ (.28) /2/ (.29) /27/ (.29) year September average (.58) 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 219 Wheat Marketing Plan. I priced the first 2 percent of the 219 crop on a run up to about $6. in February. I added to that sales level last week with planting of the 219 crop 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 July 219 KC Wheat and Marketing Plan /bu Early Season Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest 3/15/218: 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 1/13/218 1/23/218 11/2/218 11/12/218 11/22/218 12/2/218 12/12/218 12/22/218 1/1/219 1/11/219 1/21/219 1/31/219 2/1/219 2/2/219 3/2/219 3/12/219 3/22/219 4/1/219 4/11/219 4/21/219 5/1/219 5/11/219 5/21/219 5/31/219 6/1/219 6/2/219 6/3/219 7/1/219 7

8 Upcoming Reports/Events October 11 WASDE Crop Production October 19 Cattle on Feed 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 begins September 15. 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 8