Colorado Wheat Weekly Wire #230 danmaltby.riskmgmt@gmail.com 03/18/16 pg. 1

Hello Colorado Wheat.

We know the future prices do not tell the whole story, as cash bids a farmer receives for his wheat are

usually in dollars per bushel, and that price is usually derived from the formula: Flat price = futures price

less basis, and in that regard, USA HRW farmers did not have a good week. When combined with a

“reluctant to rally” futures market, and a freeze event which undoubtedly did some damage to the HRW

crop amid a persistent low moisture environment, it was a rough week. Add to that some GMO issues,

and it was even a rougher week than one might know. (I’m leaning towards a double yuk right now…)

Working backwards… GMO issues are complex, and were made more complex this week by 2 events.

Most wheat farmers also grow corn or soybeans, and the seeds have been treated for many reasons.

One of the seed treatments involves using neonicotinoids, which beekeepers have blamed for the

decrease in the honeybee population. Minnesota created a law in 2014 which has a system to allow

beekeepers to be compensated by the state, which happened this week for the first time. The state

ruled that 2 beekeepers were harmed by corn growers, even though the corn growers were not doing

anything illegal. The article is linked here… http://www.startribune.com/in-win-for-beekeepers-state-

links-insecticide-to-damaged-hives/372728941/

and while it’s tempting to say this is just a problem in Minnesota…this week we saw the US Senate block

a bill that would have set national voluntary food label standards and prevented individual states from

forming their own food labeling laws. Vermont has been at the front of this particular issue, although

Maine and Connecticut have enacted similar laws. Unless a compromise bill can be passed quickly

(doubtful), Vermont’s law will take effect July 1. Some food companies have already stated they will be

changing their labels to comply with Vermont’s law. This article indicates the Colorado Farm Bureau was

disappointed the US Senate was not able to reach a compromise… and I’m sure most farm groups felt

the same way. http://blogs.denverpost.com/thespot/2016/03/17/125247/125247/

Most of Western Kansas and Eastern Colorado’s wheat was hurt Friday night or Saturday morning,

enduring several hours of sub-freezing temperatures. The picture from Sumner County, KS went viral

last night. Wheat is more advanced than normal, and cold temps undoubtedly damaged some wheat.

Charts and discussions follow, with the goal of giving you useful information to help you with your

business. My disclaimer remains the same: these are my sometimes rapidly changing opinions; the

markets are quite treacherous; and past performance is no guarantee…dm

Colorado Wheat Weekly Wire #230 danmaltby.riskmgmt@gmail.com 03/18/16 pg. 2

How bad was the freeze event? It was bad. How much yield did we lose? That’s impossible to answer.

Tomorrow’s crop conditions will be way too early to get a handle on how it looks. One thing we do know

is this event was NOT accompanied by moisture, nor will this week bring much relief, although Nebraska

might get something.

What’s personally confounding to me (my position actually) is that the market chose to focus on this 6-

10-day outlook, which says moisture is coming (just not this week…):

Let’s hope this forecast comes true. I admit I have my doubts.

But the market took it as a prefect “reason” to reject the $5.00 in KC July once again, on a quick 24c

drop in a day.

Colorado Wheat Weekly Wire #230 danmaltby.riskmgmt@gmail.com 03/18/16 pg. 3

The weekly closing table shows a weekly drop of 13c. Obviously no 11-week closing highs in KC, nor in

Minneapolis, which did set some 11 week highs a week ago. MGEX fizzled back this week, but only

closed 6c lower. Corn and beans didn’t really help wheat, although they didn’t hurt it either.

CLOSE KWK16 KWN16 KWZ16 CK16 CN16 CZ16 WK16 MWK16 MWN16 SK16

03/18 $4.70 $4.80 $5.14 $3.67 $3.72 $3.86 $4.63 $5.09 $5.18 $8.98

03/11 $4.83 $4.93 $5.25 $3.65 $3.70 $3.83 $4.76 $5.15 $5.24 $8.96

03/04 $4.69 $4.78 $5.11 $3.58 $3.64 $3.78 $4.61 $4.98 $5.05 $8.79

02/26 $4.54 $4.65 $4.99 $3.60 $3.64 $3.78 $4.52 $4.90 $4.99 $8.64

02/19 $4.66 $4.77 $5.11 $3.69 $3.74 $3.87 $4.67 $4.98 $5.06 $8.81

02/12 $4.54 $4.65 $4.99 $3.64 $3.69 $3.82 $4.63 $4.88 $4.95 $8.77

02/05 $4.64 $4.73 $5.07 $3.71 $3.76 $3.89 $4.71 $4.97 $5.04 $8.71

01/29 $4.82 $4.92 $5.25 $3.77 $3.82 $3.93 $4.85 $5.06 $5.12 $8.85

01/22 $4.81 $4.93 $5.23 $3.75 $3.80 $3.92 $4.80 $5.03 $5.09 $8.77

01/15 $4.84 $4.94 $5.26 $3.68 $3.73 $3.85 $4.79 $5.04 $5.11 $8.79

01/08 $4.83 $4.92 $5.26 $3.63 $3.69 $3.83 $4.84 $5.08 $5.17 $8.68

01/01 $4.79 $4.89 $5.24 $3.65 $3.71 $3.83 $4.77 $5.02 $5.13 $8.70

It is obvious that the wheat market does not want to rally, and will take any opportunity to squash rally

attempts. Conversely, once we can finally close above $5.00, and especially close above that 200-day

moving average (purple line in the chart), it’s not inconceivable we get a rally that persists and extends.

But we’re going to need help. We know HRW acres planted last fall were down about 2.6 million acres,

down to somewhere around 26 million acres. How much did this freeze hurt yields?

Colorado Wheat Weekly Wire #230 danmaltby.riskmgmt@gmail.com 03/18/16 pg. 4

How much will rain, or lack of rain, impact yields are probably better questions, but…

A 10 bu/ac drop in the Great Plains is 260 million bushels, about a third of USA HRW production. Again,

it’s too early to say what happened, but we have only just begun this discussion.

AgCanada released their early look at 2016/17, and it’s interesting that they are calling for a 4% drop in

spring wheat acreage up North. (And this when their farmers are currently getting $6.50 or so for their

wheat… that is in Canadian dollars, but still…that’s pretty good, and the main reason why I question why

spring wheat acreage up there would decrease.) What are they going to plant? Some spring wheat will

shift to durum, but pulses and lentils are expected to gain 400,000 acres and canola might also gain

400,000 acres. Soybeans increase a little, like they do about everywhere in the world…

Anyway, my point is…spring wheat yields will ALSO be a hot topic of discussion.

IF North American winter wheat yields decrease with the already known decrease in winter wheat

acreage, and North American spring wheat yields decrease, along with the suspected decrease in spring

wheat acreage, THEN (and maybe only then…) can we seriously whittle away at the world wheat

mountain (238 million TONNES) we are currently sitting on.

Corn weather this summer will be important too, and we’ll discuss that many many times in the future.

In the meantime, did this freeze hurt USA hard red winter wheat? Yes.

How much? 10 bu/ac? No, I doubt it. Is it going to rain? I hope so.

I mentioned the basis was also lower this week, which it was, although posted bids are not down

everywhere. One spot is a few c higher.

USA exports, especially USA HRW exports, remain lackluster at best, and that alone is bleak reminder of

why KC July cruising up and thru $5.00 is no easy matter. Even if the futures move higher on less supply,

without better demand, the basis will not improve, etc.

Posted bids are:

Date Lamar Chey. Wells Burlington Holyoke Roggen

03/18 $3.85-$4.00 $4.05 $3.90-$3.92 $3.80-$3.84 $4.00-$4.00

03/11 $3.98-$4.13 $4.23 $4.03-$4.05 $3.93-$3.94 $4.18-$4.18

03/04 $3.84-$3.99 $4.09 $3.89-$3.91 $3.78-$3.81 $4.04-$4.04

02/26 $3.58-$3.84 $3.93 $3.68-$3.75 $3.63-$3.65 $3.88-$3.88

02/19 $3.72-$3.92 $4.07 $3.82-$3.89 $3.74-$3.79 $4.02-$4.02

02/12 $3.59-$3.79 $3.94 $3.69-$3.76 $3.61-$3.65 $3.89-$3.89

02/05 $3.69-$3.89 $4.04 $3.79-$3.86 $3.71-$3.75 $3.99-$3.99

01/29 $3.87-$4.12 $4.17 $3.94-$3.97 $3.89-$3.93 $4.12-$4.12

01/22 $3.86-$4.06 $4.16 $3.93-$3.96 $3.88-$3.92 $4.11-$4.11

Colorado Wheat Weekly Wire #230 danmaltby.riskmgmt@gmail.com 03/18/16 pg. 5

01/15 $3.89-$4.09 $4.19 $3.96-$3.99 $3.89-$3.95 $4.14-$4.14

01/08 $3.88-$4.08 $4.18 $3.95-$3.98 $3.88-$3.90 $4.13-$4.13

BASIS Lamar Chey. Wells Burlington Holyoke Roggen

03/18 -85, -70 -65 -80, -78 -90, -86 -70, -70

03/11 -85, -70 -60 -80, -78 -90, -89 -65, -65

03/04 -85, -70 -60 -80, -78 -91, -88 -65, -65

02/26 -85, -65 -50 -75, -68 -80, -79 -55, -55

02/19 -85, -65 -50 -75, -68 -83, -79 -55, -55

02/12 -85, -65 -50 -75, -68 -83, -79 -55, -55

02/05 -85, -65 -50 -75, -68 -83, -79 -55, -55

01/29 -85, -60 -55 -78, -75 -83, -79 -60, -60

01/22 -85, -65 -55 -78, -75 -83, -79 -60, -60

01/15 -85, -65 -55 -78, -75 -85, -79 -60, -60

01/08 -85, -65 -55 -78, -75 -85, -83 -60, -60

I suspect we start the week on a firm note, as certainly the freeze event will be a prime conversation

piece. How we end the week is more important, and the 6-10 day forecast I showed earlier will be

updated, and impactful.

Funds are still short, but that alone is not enough reason for a full blown rally.

A serious long-lived rally will be due to a combination of many things, including North American spring

wheat yields, and corn growing weather, and something entirely out of our control, the US dollar

exchange rates.

I suspect this rally heightened interest in The Wheat Tour, if nothing else. I would not be surprised if a

couple of Brazilian millers take The Tour this year… if they do, I suggest not discussing their politics,

which might be more messed up than ours, as hard as that may be to believe.