Wheat Outlook June 14, 2017 Volume 26, Number 36

Transcription

1 Today s Newsletter Market Situation Crop Progress 1 Weather 3 Grain Use 5 Marketing Strategies 2017 Wheat Marketing Plan 6 Upcoming Reports/Events 7 Market Situation Crop Progress. Only minor adjustments were made to the U.S. winter wheat crop condition ratings this week. The percent of crop rated very poor increased by 1, the percent rated excellent increased by 1, and the fair category declined by 2. This left the crop condition index score unchanged at 337. The average score for this week of the growing season is 326. The rating of last year s record setting yield was 362. The condition index score looks to support USDA s estimated yield for 2017 of 48.9 bushels per acre, above trendline of 46.8 (which would be indicated by normal index values), and below last year s 55.3 bushel record. The percent of winter wheat rated very poor and poor in Kansas declined from 26% to 24%; the same categories in South Dakota increased from 38% to 48%. % 2017 U.S. Winter Wheat Crop Condition Ratings CCI f Oct 31-Oct 7-Nov 14-Nov 21-Nov 28-Nov 5-Dec 12-Dec 19-Dec 26-Dec 2-Jan 9-Jan 16-Jan 23-Jan 30-Jan 6-Feb 13-Feb 20-Feb 27-Feb 6-Mar 13-Mar 20-Mar 27-Mar 3-Apr 10-Apr 17-Apr 24-Apr 1-May 8-May 15-May 22-May 29-May 5-Jun 11-Jun 19-Jun 26-Jun Very Poor Poor Fair Good Excellent Average 2017: 48.9f; 2016: 55.3; Trend: 46.8 bu/ac USDA Crop Progress, June 12, 2017 South Dakota also shows the highest percentages of spring wheat in the very poor and poor categories at 57%, up from 32% last week. The U.S. spring wheat crop index this week is 325, down 23 points from last week and below the average index of

2 % U.S. Spring Wheat Crop Condition Ratings CCI Very Poor Poor Fair Good Excellent 2017 Average USDA Crop Progress, June 12, 2017 The condition ratings of the Texas wheat crop were unchanged in this week s report. The index stands at 323 compared to 363 last year and an average score of Texas Winter Wheat Condition Ratings % CCI /24 10/31 11/7 11/14 11/21 11/28 12/5 12/12 12/19 12/26 1/2 1/9 1/16 1/23 1/30 2/6 2/13 2/20 2/27 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/11 6/19 6/26 7/3 Very Poor Poor Fair Good Excellent Average USDA Crop Progress, June 12, : 30.0; 2016: 32.0; 10-yr Average : 30.7 bu/ac 2

3 Weather. Drought conditions in the winter wheat crop are of most concern in the Dakotas. 3

4 The precipitation forecast for the next 5 days shows only light amounts (<1/2 inch) west of the Red River Valley except for the Canadian/North Dakota border. The long-term outlook calls for this region to be one of the wetter than normal parts of the country. 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 0.4 C above normal, with the seasonal high temperature deviation currently forecast for the end of July. Precipitation Forecast ( Days 1-3 Days 4-5 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 most of the Pacific Ocean. ENSO neutral is favored (50 to ~55% chance) through the Northern Hemisphere fall C Actual Measurements Predicted 1.0 El Nino Neutral Latest actual weekly SST departure -0.5 La Nina AMJ MJJ JJA JAS ASO SON OND NDJ DJF '17 El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, June 12, JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '18 Grain Use. The final export sales numbers on May 31, the end of the marketing year, show all U.S. wheat export sales of billion bushels, 101% of the target set by USDA and up from 775 million bushels in 2015/16 Mil bu 2016/17 U.S. All Wheat Export Sales Commitments 1, Projected MY Total Cumulative Net Sales Top Importers, Current MY, mil bu. Mexico % Japan % Phillipines % Nigeria 60 6% China 61 6% Korea 53 5% Brazil 45 4% Indonesia 44 4% Taiwan 40 4% 0 Weekly Net Sales Sales pace to reach target: Export Sales Commitments for the end of the Marketing Year 6/1/2017: 1 million bushels Total Export Sales Commitments this marketing year: 1,0432 million bushels 101% of the 2016/17 MY Export Sales Target of 1,035 million bushels (May WASDE) Normal sales commitments by the end of May: % USDA, Foreign Agricultural Service: June 8,

6 The spread between the July and September Kansas City wheat futures contracts at 11:45 am is 17½ cents, up 1½ cents from the first of April. This amount is above full carry for that 60 day period (2 months x 6 cents per bushel/month = 12 cents). Any percentage of carry above 67% is generally considered a bearish commercial market indicator. II Qtr Apr 14-Jun net change % change JUL 17 KC Wheat % SEP 17 KC Wheat % Difference % Carry 133% 146% 12% JUL to SEP JUL 18 KC Wheat % Marketing Strategies 2017 Wheat Marketing Plan. With a lower acreage base for wheat, we are seeing a positive price response with less than favorable growing conditions even with adequate carryover crop supplies. I priced the first 20% of the 2017 wheat crop at 480 on the best prices we had seen since last summer. The weather rally in early May provided an opportunity to add to pre-harvest sales at 461. I added another 20% to 2017 sales this week at 450. I am ready to price at least an additional 20% at harvest with the option of holding 20% in storage if the market trend is still up. Depending on the quality of the crop and the cost and availability of storage, there may be an opportunity to capture the carry in the market and a better basis on this year s wheat crop. This can be accomplished by contracting to deliver grain later in the fall. If I am still concerned about missing out on the possibility of higher prices later in the year, I can combine contracting with the purchase of call options. If this seems too expensive, consider buying calls and selling calls. This limits the upside potential but lowers the cost of the trade significantly. For more on these types of marketing strategies, see The Minimum Price Contract and Using a Bull Call Spread as part of our Risk Management Curriculum Guide at: 6

7 /bu July 2017 KC Wheat and Marketing Plan Early Season Price Rally / Early Crop Conditions 2/24/2017: Sold 20% at 480 5/4/2017: Sold 20% at 461 6/12/2017: Sold 20% at 450 Emerging from Dormancy/Late Season Conditions Harvest /2/2016 5/10/2016 5/18/2016 5/26/2016 6/6/2016 6/14/2016 6/22/2016 6/30/2016 7/11/2016 7/19/2016 7/27/2016 8/4/2016 8/12/2016 8/22/2016 8/30/2016 9/8/2016 9/16/2016 9/26/ /4/ /12/ /20/ /28/ /7/ /15/ /23/ /2/ /12/ /20/ /29/2016 1/9/2017 1/18/2017 1/26/2017 2/3/2017 2/13/2017 2/22/2017 3/2/2017 3/10/2017 3/20/2017 3/28/2017 4/5/2017 4/13/2017 4/24/2017 5/2/2017 5/10/2017 5/18/2017 5/26/2017 6/6/2017 6/14/2017 6/22/2017 6/30/2017 7/6/2017 7/12/2017 Upcoming Reports/Events. June 23 June 29 June 30 July 1 September October 2-3 October October Cattle on Feed Hogs and Pigs Acreage Grain Stocks Registration opens for Master Marketer, brochure available at: Registration opens for TEPAP, brochure available at: Master Marketer, Castroville, Texas 7

8 Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas Tel. (979) Fax. (979) 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