Wheat Outlook September 21, 2018 Volume 27, Number 59

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1 Today s Newsletter Market Situation Crop Progress 1 Weather 1 Grain Use 3 Commitment of Traders 4 Texas Cash Wheat s 7 Marketing Strategies Seasonal Index Wheat Marketing Plan 8 Market Situation Crop Progress. This week s Crop Progress reports 97 percent of the spring wheat crop has been harvested. This is ahead of a normal pace of 92 percent. Winter wheat sowing is at 13 percent, very close to the five-year average of 14 percent. The only major wheat state significantly off the normal pace is Montana with still no wheat reported planted even though the average is 23 percent. The weekly Montana Crop Progress notes dry conditions in the eastern half of the state in counties along the Canadian border as well as the southeast (also noted is bear damage to corn fields, but that s another story). Weather. The drought situation in the Southern Plains improved again this week as the area in some degree of drought classification dropped down to 5 percent. The drought index of 86 this week is not as good as last year s 37, but is below the fiveyear average of 17. Southern Plains Drought Monitor, 9/18/218 % DSCI 1 5 Upcoming Reports/Events 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, 9/2/218, Southern Plains Climate Hub, The five-day precipitation forecast is for significant rainfall over some of the areas in Texas and Oklahoma still in severe to extreme drought. Totals of an inch or better are expected from the Rolling Plains and central Texas across southern Oklahoma and Arkansas to the Ohio Valley. 1

2 Drought Monitor, 9/2/218, Southern Plains Climate Hub, 2

3 The ENSO update this week continues the El Nino watch. There is a 6% chance of El Niño in the Northern Hemisphere fall 218 (September-November), increasing to 7% during winter This week s sea surface temperature departure from normal is +.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 16 September 218 C National Centers for Environmental Prediction Climate Forecast System Version 2 Actual Measurements Predicted El Nino Neutral Latest actual weekly SST departure -.5 La Nina OND NDJ DJF '18 JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '19 JFM FMA MAM El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, September 17, Grain Use. This week s wheat export sales report was higher but still below the weekly pace needed to reach USDA s 218/19 forecast. Sales of 17 million bushels were reported for the week of September 13 bringing cumulative sales to 375 million bushels. This is 37 percent of the projected marketing year total. Normally by the end of September, over half of the yearly sales are on the books. An average pace of 18 million bushels from now to May 31 is needed to reach the 1.25 billion bushel target. 3

4 Mil bu 1, 218/19 U.S. All Wheat Export Sales Commitments Projected MY Total Cumulative Net Sales Weekly Net Sales Top Importers, Current MY, mil bu. Phillipines 59 16% Mexico 45 12% Japan 44 12% Korea 31 8% Thailand 19 5% Taiwan 19 5% Nigeria 17 5% Indonesia 13 3% Iraq 11 3% EU % Guatemala 9 2% Pace to reach the target: 18 Export Sales Commitments for the week 9/13/218: 17 million bushels Total Export Sales Commitments this marketing year: 375 million bushels 37% 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 2, 218 Commitment of Traders. The Commitment of Traders report for positions on Tuesday, September 18, shows increasingly bearish positioning on the part of speculative grain traders. Last Tuesday s trade was dominated by a worsening outlook for US-China trade relations and corn and soybeans both traded at their contract lows. Corn had the most dramatic change week to week with 21,428 fewer long contracts held, an increase in short contracts of 62,295, for a net swing of -83,723. Non-commercial net long positions 8/28 9/4 9/11 9/18 Net Longs Change Change Corn 65,37 71,885 69,28 (14,515) (83,723) (23.5) Soybeans (4,565) (55,657) (66,552) (69,526) (2,974) (17.75) Chicago Wheat 63,9 6,599 45,523 36,629 (8,894) (8.25) KC Wheat 68,715 64,526 54,226 48,28 (6,18) (6.75) Total 157,42 141,353 12, (11,69) 4

5 Contracts 5, 4, 3, 2, 1, (1,) Non-commercial Investment in Corn, /bu Net Long CFTC Legacy Report, Futures Only, 9/21/218 Contracts 25, 2, 15, 1, 5, (5,) (1,) Non-commercial Investment in Soybeans, /bu 1,1 1,5 1, Net Long CFTC Legacy Report, Futures Only, 9/21/

6 Non-commercial Investment in Wheat Contracts 1, 8, 6, 4, 2, (2,) (4,) (6,) (8,) (1,), /bu Net Long CFTC Legacy Report, Futures Only, 9/21/218 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, 9/21/

7 Texas Cash Wheat s. Avg TX cash TX Gulf cash-gulf wheat basis export bid basis spread 8/23/ (.19) /3/ (.15) /6/ (.28) /13/ (.28) /2/ (.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) 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 9/21/218 7

8 219 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 Upcoming Reports/Events September 27 Hogs and Pigs September 28 Grain Stocks Small Grains Summary October 11 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 begins September 15. 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