Today s Newsletter Market Situation WASDE 1 Crop Progress 5 Weather 6 Market Situation WASDE. The only change to the U.S. supply and demand balance sheet for U.S. wheat in this month s World Agricultural Supply and Demand Estimates reflects improved planting conditions and better prices: wheat for seed was up 7 million bushels. The season average farm price projection remains at $5.1 per bushel, which would result in a PLC payment of 4 cents. Commitment of Traders 8 Texas Cash Wheat Prices 9 Marketing Strategies Seasonal Index 9 219 Wheat Marketing Plan 1 Upcoming Reports/Events 1 Global wheat numbers reflect revisions in China s grain sector, but to a much lesser extent than that seen in corn. China raised its wheat production estimate by 4.5 mmt and its beginning stock number by 4.4 mmt. With consumption up 1 mmt, China s ending stocks increased 7.45 mmt. Production estimates were lowered in Australia (-1 mmt), Pakistan (-.8 mmt), and the FSU-12 (-.56 mmt). The world days of use on hand increased from 127 days to 131 days, but without China, remained steady at 73 days, the lowest since 27/8. 1
Million bushels U.S. Wheat Supply and Demand, 11/8/218 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 Beginning Stocks Production Imports Domestic Use Exports Ending Stocks + + + = +7 + -7 217/18 May 18/19 Jun 18/19 Jul 18/19 Aug 18/19 Sep 18/19 Oct 18/19 Nov 18/19 Million Bushels 2, U.S. Wheat Use 1,75 1,5 1,25 1, 75 5 25 8/81 81/82 82/83 83/84 84/85 85/86 WASDE, 11/8/218 86/87 2 87/88 88/89 89/9 9/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/ /1 1/2 2/3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 Ending Stocks Feed and Residual Exports Food and Seed
Billion bushels 3 World Wheat Production 25 2 15 1 5 U.S. Foreign WASDE 11/8/218 3
mmt 17. 16. 15. 14. 13. 12. 11. 1. 9. 8. 7. 6. 5. 4. 3. 2. 1.. Wheat Production, Major Countries Argentina Australia Canada China EU FSU-12 India Pakistan US 214/215 215/216 216/217 217/218 218/219 87% of global wheat production WASDE, 11/8/218 World Wheat: Days of Use on Hand 16 14 12 1 8 6 4 2 WASDE, 11/8/218 Days of Use w/o China 4
Crop Progress. The Crop Progress report for November 5 showed a slight improvement in the condition of the U.S. wheat crop. The fair category decreased 2 percent, fair was up 4, good down 3 and excellent up 1. This raised the index from 344 last week to 345, nearer the longterm average. % 1 9 8 7 6 5 4 3 2 1 219 U.S. Winter Wheat Crop Condition Ratings CCI 5 45 4 35 3 25 2 15 28-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 1 Very Poor Poor Fair Good Excellent 219 Average USDA Crop Progress, November 5, 218 The Texas wheat crop condition index is near normal as well but slipped 3 points this week to 324. Wheat rated very poor declined 1 percent, poor was up 1, fair up 4, and good down 4. 219 Texas Winter Wheat Condition Ratings % CCI 1 5 9 8 7 6 5 4 3 2 1 1/28 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 6/3 45 4 35 3 25 2 15 1 Very Poor Poor Fair Good Excellent 219 Average USDA Crop Progress, November 5, 218 5
Weather. The drought situation in the Southern Plains improved again this week. As of November 6, 95 percent of the Southern Plains Climate Hub was drought free. The drought index is 6, down from 7 the week before. This compares to 42 last year, and on the rise, and a five-year average of 88. Southern Plains Drought Monitor, 11/6/218 % DSCI 1 5 9 8 7 6 5 4 3 2 1 45 4 35 3 25 2 15 1 5 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, 11/8/218, Southern Plains Climate Hub, http://droughtmonitor.unl.edu/ 6
Moisture is expected across most of the Southern Plains the next few days; heavy rain is forecast for the Southeast. Most of the Corn Belt looks clear. 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 218-19. This week s sea surface temperature departure from normal is +1.2 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 spring 219. Issued 4 November 218 C 2. 1.5 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 -1. -1.5-2. DJF '18 JFM FMA MAM AMJ MJJ JJA JAS ASO SON OND NDJ DJF '19 7 JFM FMA MAM AMJ MJJ El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, November 5, 218 http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/
Commitment of Traders. Ahead of this week s WASDE report on Thursday, speculative traders in the grain markets last Tuesday were considerably less bearish. Short contracts held in corn, soybeans, Chicago wheat, and Kansas City wheat were all down. This resulted in an increase in net longs in all markets, along with higher prices across the board. Non-commercial net long positions 1/16 1/23 1/3 11/6 Net Longs Change Price Change Corn 19,611 123,28 122,464 13,34 7,876 8.5 Soybeans (29,774) (31,539) (64,215) (34,13) 3,22 5.75 Chicago Wheat 32,885 2,328 7,769 9,859 2,9 12.25 KC Wheat 41,157 36,879 25,759 28,245 2,486 13.25 Total 153,879 148,948 91,777 134,431 42,654 http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm Contracts 5, 4, 3, 2, 1, Non-commercial Investment in Corn Price, /bu 42 4 38 36 34 32 (1,) 2-Jan-18 16-Jan-18 3-Jan-18 13-Feb-18 27-Feb-18 13-Mar-18 27-Mar-18 1-Apr-18 24-Apr-18 8-May-18 22-May-18 5-Jun-18 19-Jun-18 3-Jul-18 17-Jul-18 31-Jul-18 14-Aug-18 28-Aug-18 11-Sep-18 25-Sep-18 9-Oct-18 23-Oct-18 6-Nov-18 Net Long Price CFTC Legacy Report, Futures Only, 11/9/218 https://www.cftc.gov/marketreports/commitmentsoftraders/index.htm 3 Contracts 1, 8, 6, 4, 2, (2,) (4,) (6,) (8,) (1,) Non-commercial Investment in Wheat 2-Jan-18 16-Jan-18 3-Jan-18 13-Feb-18 27-Feb-18 13-Mar-18 27-Mar-18 1-Apr-18 24-Apr-18 8-May-18 22-May-18 5-Jun-18 19-Jun-18 3-Jul-18 17-Jul-18 31-Jul-18 14-Aug-18 28-Aug-18 11-Sep-18 25-Sep-18 9-Oct-18 23-Oct-18 6-Nov-18 Net Long Price CFTC Legacy Report, Futures Only, 11/9/218 https://www.cftc.gov/marketreports/commitmentsoftraders/index.htm Price, /bu 6 55 5 45 4 35 3 Contracts 85, 75, 65, 55, 45, 35, 25, 15, 5, (5,) Non-commercial Investment in KC Wheat 2-Jan-18 16-Jan-18 3-Jan-18 13-Feb-18 27-Feb-18 13-Mar-18 27-Mar-18 1-Apr-18 24-Apr-18 8-May-18 22-May-18 5-Jun-18 19-Jun-18 3-Jul-18 17-Jul-18 31-Jul-18 14-Aug-18 28-Aug-18 11-Sep-18 25-Sep-18 9-Oct-18 23-Oct-18 6-Nov-18 Net Long Price CFTC Legacy Report, Futures Only, 11/9/218 https://www.cftc.gov/marketreports/commitmentsoftraders/index.htm Price, /bu 6 55 5 45 4 35 3 8
Texas Cash Wheat Prices. Avg TX cash TX Gulf cash-gulf wheat basis export bid basis spread October 11 4.87 (.27) 5.84.7.97 October 18 4.91 (.24) 5.85.7.94 October 25 4.59 (.28) 5.57.7.98 November 1 4.72 (.29) 5.71.7.99 November 8 4.68 (.29) 5.67.7.99 5-year November average (.53).74 1.27 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 1..9.8.7.6.5.4.3.2.1 July KC Wheat Seasonal Index 28-218 July 219 Closing Futures Price Price 64. 62. 6. 58. 56. 54. 52.. 1-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 5. 28-218 KW19N Updated 11/9/218 9
219 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. July 219 KC Wheat and Marketing Plan /bu Early Season Price Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest 65 64 63 62 61 6 59 58 57 56 55 54 53 52 51 3/15/218: Hedged 17% at 577.5 9/4/218: Hedged 17% at 567.25 5 3/1/218 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 11/14/218 11/29/218 12/9/218 12/19/218 12/29/218 1/8/219 1/18/219 1/28/219 2/7/219 2/17/219 2/27/219 3/9/219 3/19/219 3/29/219 4/8/219 4/18/219 4/28/219 5/8/219 5/18/219 5/28/219 6/7/219 6/17/219 6/27/219 7/7/219 Upcoming Reports/Events November 21 Cattle on Feed December 3 December 11 December 21 December 28 Grain Crushings WASDE Short-term Energy Outlook, Energy Information Administration Cattle on Feed Hogs and Pigs Grain Stocks January 6-12, 219 TEPAP The Executive Program for Agricultural Producers, Austin, TX http://tepap.tamu.edu/. Registration is now open. Jan 22-Mar 7, 219 Master Marketer, Lubbock, TX https://agecoext.tamu.edu/programs/marketing-programs/mastermarketer-program/. Registration is now open. 1
Mark Welch, Texas A&M AgriLife Extension Economist 6 John Kimbrough Blvd, Suite 335 College Station, Texas 77843 Tel. (979)845-811 Fax. (979)845-496 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