Wheat Outlook - Texas A&M AgriLifeagrilife.org/agecoext/files/2013/08/W_2017-05-11.pdf · 2017-05-28 · Wheat Outlook May 11, 2017 Volume 26, Number 26 3 Global wheat production

Wheat Outlook May 11, 2017 Volume 26, Number 26

1

Today’s Newsletter

Market Situation WASDE 1 Crop Progress 5 Weather 6 Commitment of Traders 9 Marketing Strategies 2017 Wheat Marketing Plan 12 Upcoming Reports/Events 13

Market Situation

WASDE. Mixed wheat market messages in yesterday’s World Agricultural Supply and Demand Estimates: U.S. wheat stocks to use ratio at the end of the new crop 2017/18 marketing year down 10%; world stocks to use went up.

For the U.S., adjustments to old crop numbers were a 10 million bushel increase in exports that were offset by a 5 million bushel increase in imports and a 5 million bushel decrease in food use. Ending stocks for 2016/17 (beginning stocks for 2017/18) were unchanged at 1.159 billion bushels. The season average farm price for old crop wheat went up 5 cents to $3.90.

With fewer acres and normal yields, the 2017 wheat crop is projected at 1.820 billion bushels, the smallest wheat crop since 2006. Total wheat supplies are estimated 295 million bushels below last year and use is down 50 million bushels. Ending stocks on May 31, 2018 are forecast at 914 million bushels, down 245 million from 16/17. The season average farm price is $4.25.


2

U.S. Wheat Supply and Demand, 5/10/2017

0

500

1,000

1,500

2,000

2,500

Beginning Stocks Production Imports Domestic Use Exports Ending Stocks

2016/17 May 17/18

+183 -490 +10 = -15 -35 -245

Million bushels

U.S. Wheat Use

0

250

500

750

1,000

1,250

1,500

1,750

2,000

80/81

81/82

82/83

83/84

84/85

85/86

86/87

87/88

88/89

89/90

90/91

91/92

92/93

93/94

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

13/14

14/15

15/16

16/17

17/18

Million Bushels

Ending Stocks Feed and Residual Exports Food and Seed

WASDE, 5/10/2017


3

Global wheat production for 2017/18 is down led by smaller crops in the U.S., FSU-12, and Australia. However, the 15.3 mmt reduction in crop size is offset by an increase in beginning stocks of 12.9 mmt and a reduction in use of 5.3 mmt. The ending stock estimate is up 2.9 mmt over last year and days of use on hand at the end of the marketing year up to a 128-day supply.

World Wheat Production

0

5

10

15

20

25

30

U.S. Foreign

Billion bushels

WASDE 5/10/2017

WORLD WHEAT MMTBeginning StoProduction Imports Feed Use Total Use Exports Ending Stocks Stocks to Use Days on hand

2005/06 156.48 618.87 110.15 111.31 620.92 116.16 154.43 0.25 90.782006/07 154.43 596.53 112.37 105.80 616.46 110.96 134.50 0.22 79.632007/08 134.50 612.65 107.31 101.20 617.80 109.56 129.35 0.21 76.422008/09 129.35 683.53 127.94 115.47 643.65 129.78 169.24 0.26 95.972009/10 169.24 687.09 133.64 117.72 654.39 135.80 201.94 0.31 112.642010/11 201.94 650.79 131.65 116.33 654.55 132.43 198.19 0.30 110.522011/12 198.19 695.99 149.32 146.87 696.92 157.78 197.26 0.28 103.312012/13 196.16 657.94 144.22 137.09 679.27 137.36 174.46 0.26 93.752013/14 177.07 715.26 158.36 126.77 697.95 165.91 193.77 0.28 101.332014/15 193.77 725.91 158.69 132.60 705.69 164.37 212.07 0.30 109.692015/16 217.51 737.00 169.95 136.51 712.08 172.85 242.42 0.34 124.262016/17 242.42 753.09 175.45 147.52 740.16 179.74 255.35 0.34 125.922017/18 May 255.35 737.83 178.53 138.54 734.89 178.35 258.29 0.35 128.29

Net Change 12.93 (15.26) 3.08 (8.98) (5.27) (1.39) 2.94 0.01 2.36Percentage Change 5.3% -2.0% 1.8% -6.1% -0.7% -0.8% 1.2% 1.9% 1.9%


4

Wheat Production, Major Countries

0102030405060708090

100110120130140150160170

Argentina Australia Canada China EU FSU-12 India Pakistan US2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

mmt

WASDE, 5/10/2017

88% of global wheat production

World Wheat: Days of Use on Hand

128

107

0

20

40

60

80

100

120

140

Days of Use 20-yr avg

WASDE, 5/10/2017


5

Crop Progress. The condition of the U.S. and Texas wheat crops in last Monday’s Crop Progress slipped slightly from the previous week. Notable in the Kansas release was the comment that the effects of the recent snowfall and freezing temperatures were still being assessed. For all U.S. winter wheat, the percent rated very poor and poor both increased by 1, the fair declined by 1 and the good by 2, and the excellent category increased by 1. The crop condition index score fell 3 points to 344. The average index for this week of the growing season is 331.

2017 U.S. Winter Wheat Crop Condition Ratings

100

150

200

250

300

350

400

450

500

0

10

20

30

40

50

60

70

80

90

100

24-O

ct31

-Oct

7-N

ov14

-Nov

21-N

ov28

-Nov

5-D

ec12

-Dec

19-D

ec26

-Dec

2-Ja

n9-

Jan

16-J

an23

-Jan

30-J

an6-

Feb

13-F

eb20

-Feb

27-F

eb6-

Mar

13-M

ar20

-Mar

27-M

ar3-

Apr

10-A

pr17

-Apr

24-A

pr1-

May

8-M

ay15

-May

22-M

ay29

-May

5-Ju

n12

-Jun

19-J

un26

-Jun

Very Poor Poor Fair Good Excellent 2017 2016 Average

% CCI

2016: 55.3; Trend: 46.8 bu/ac

46.8

55.3

USDA Crop Progress, May 1, 2017

The Texas crop condition index fell 6 points this week to 328. Very poor was unchanged, poor increased 1%, fair was up 3%, good down 3%, and excellent decreased 1%. The average crop condition index for Texas wheat at this time of year is 287.

Texas wheat production estimates for 2017 from the National Agricultural Statistics Service are 69 million bushels off of 2.3 million harvested acres. The average yield is projected at 30 bushels per acre. These numbers compare to 89.6 million bushels of production last year from 2.8 million acres and a yield of 32.0 bushels per acre.


6

2017 Texas Winter Wheat Condition Ratings

100

150

200

250

300

350

400

450

500

0

10

20

30

40

50

60

70

80

90

100

10/2

410

/31

11/7

11/1

411

/21

11/2

812

/512

/12

12/1

912

/26

1/2

1/9

1/16

1/23

1/30 2/

62/

132/

202/

27 3/6

3/13

3/20

3/27 4/

34/

104/

174/

24 5/1

5/8

5/15

5/22

5/29 6/

56/

126/

196/

26 7/3

Very Poor Poor Fair Good Excellent 2017 2016 Average

% CCI

2016: 32.0; 10-yr Average : 30.7 bu/ac

32.0

30.7

USDA Crop Progress, May 8, 2017

Weather. Drought conditions for the winter wheat producing areas are much improved compared to early March.

The heaviest precipitation in this area since last Tuesday is over eastern Colorado, northwest Kansas, and the Texas panhandle.

The forecast calls for dry conditions the next several days, a favorable outlook with much of the Texas crop ready to cut. Light rainfall is back in the forecast for early next week.

The Oceanic Nino Index is forecast to continue in mostly neutral territory this summer into early fall.


7

March 7, 2017 May 9, 2017


8

Precipitation Forecast (http://www.wpc.ncep.noaa.gov/qpf/day4-7.shtml):

ENSO Alert System Status: Not ActiveENSO-neutral conditions are present. Equatorial sea surface temperatures (SSTs) are near average across the central Pacific. They are above average in the eastern Pacific Ocean.ENSO neutral conditions are favored to continue through at least the Northern Hemisphere spring 2017, with increasing chances for El Nino development by late summer and fall.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Actual Measurements Predicted

°C

El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, May 8, 2017http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/

El Nino

Neutral

La Nina

Oceanic Nino Index (ONI)

Latest actual weekly SST departure

Days 1-3 Day 4-5

http://www.wpc.ncep.noaa.gov/qpf/day4-7.shtml


9

Commitment of Traders. The Commitment of Traders Report from the CFTC last Friday showed preliminary positioning on the part of money managers ahead of this week’s WASDE report and trader response to the snowstorm and freeze in Kansas in late April. All contracts showed a reduction in short positions as net longs increased. Kansas City wheat is the only contract to move back into positive territory for net longs, +294 contracts. But this occurred not because there were more net long contracts held--net longs went down 4,283—but because of a decrease in short positions of 22,193. The initial sharp increase in wheat prices does not appear to have stimulated significant new buying.

Managed Money, net long positions 18-Apr 25-Apr 2-May

weekly contract change

weekly price change

Corn (160,377) (180,360) (170,603) 9,757 7.25

Soybeans (49,190) (52,475) (51,483) 992 14.25

Chicago Wheat (154,345) (171,269) (123,214) 48,055 45.25

KC Wheat (15,072) (17,616) 294 17,910 55.75

Total (378,984) (421,720) (345,006) 76,714

Speculative Investment in Corn

250270290310330350370390410430450

(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

5-Ja

n2-

Feb

1-M

ar29

-Mar

26-A

pr24

-May

21-Ju

n19

-Jul

16-A

ug13

-Sep

11-O

ct8-

Nov

6-De

c3-

Jan

31-Ja

n28

-Feb

28-M

ar25

-Apr

Net Long Price

Net Long Contracts Price, ¢/bu


10

Speculative Investment in Soybeans

800

850

900

950

1000

1050

1100

1150

1200

(100,000)

(50,000)

0

50,000

100,000

150,000

200,000

250,0005-

Jan

2-Fe

b1-

Mar

29-M

ar26

-Apr

24-M

ay21

-Jun

19-Ju

l16

-Aug

13-S

ep11

-Oct

8-N

ov6-

Dec

3-Ja

n31

-Jan

28-F

eb28

-Mar

25-A

pr

Net Long Price


Speculative Investment in KC Wheat

300320340360380400420440460480500

(40,000)(30,000)(20,000)(10,000)

010,00020,00030,00040,00050,000

5-Ja

n

2-Fe

b

1-M

ar

29-M

ar

26-A

pr

24-M

ay

21-Ju

n

19-Ju

l

16-A

ug

13-S

ep

11-O

ct

8-N

ov

6-De

c

3-Ja

n

31-Ja

n

28-F

eb

28-M

ar

25-A

pr

Net Long Price



11

Speculator Positions in Hard Red Winter Wheat

380

390

400

410

420

430

440

450

460

470

480

0

20,000

40,000

60,000

80,000

100,000

120,000

7-Mar-17 14-Mar-17 21-Mar-17 28-Mar-17 4-Apr-17 11-Apr-17 18-Apr-17 25-Apr-17 2-May-17

Longs Shorts Price

Contracts Price, ₵/bu

The spread between the July and September Kansas City wheat futures contracts today is 17 cents, 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 to be a bearish commercial market indicator.

II Qtr 2017 3-Apr 11-May net change % change JUL ’17 KC Wheat 4.3225 4.4075 0.0850 1.97%

SEP ’17 KC Wheat 4.4825 4.5775 0.0950 2.12%

Difference 0.1600 0.1700 0.0100

% Carry JUL to SEP

133% 142% 8%

JUL ’18 KC Wheat 4.9850 5.1625 0.1775 3.56%


12

Marketing Strategies

2017 Wheat Marketing Plan. 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 last week provided an opportunity to add to pre-harvest sales. My trigger was a move of prices back below the 4-day moving average.

Lower U.S. ending stocks should provide some support for prices and we still do not know the full extent of crop loss in Kansas. A major price move will likely depend on crop developments outside the U.S. as we account for only about 8% of global production and 15% of world exports.

July 2017 KC Wheat and Marketing Plan

400

450

500

550

600

650

700

5/2/

2016

5/10

/201

65/

18/2

016

5/26

/201

66/

6/20

166/

14/2

016

6/22

/201

66/

30/2

016

7/11

/201

67/

19/2

016

7/27

/201

68/

4/20

168/

12/2

016

8/22

/201

68/

30/2

016

9/8/

2016

9/16

/201

69/

26/2

016

10/4

/201

610

/12/

2016

10/2

0/20

1610

/28/

2016

11/7

/201

611

/15/

2016

11/2

3/20

1612

/2/2

016

12/1

2/20

1612

/20/

2016

12/2

9/20

161/

9/20

171/

18/2

017

1/26

/201

72/

3/20

172/

13/2

017

2/22

/201

73/

2/20

173/

10/2

017

3/20

/201

73/

28/2

017

4/5/

2017

4/13

/201

74/

24/2

017

5/2/

2017

5/10

/201

75/

18/2

017

5/26

/201

76/

4/20

176/

10/2

017

6/16

/201

76/

22/2

017

6/28

/201

77/

4/20

177/

10/2

017

Early Season Price Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest

¢/bu

2/24/2017: Sold 20% at 4805/4/2017: Sold 20% at 465


13

Upcoming Reports/Events.

May 26 Cattle on Feed June 9 WASDE and Crop Production June 23 Cattle on Feed June 29 Hogs and Pigs June 30 Acreage

Grain Stocks September 18-20 Master Marketer, Castroville, Texas October 2-3 October 16-17 October 30-31 Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas 77843 Tel. (979)845-8011 Fax. (979)845-4906 [email protected] 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

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Documents

Wheat Outlook - Texas A&M AgriLifeagrilife.org/agecoext/files/2013/08/W_2017-05-11.pdf · 2017-05-28 · Wheat Outlook May 11, 2017 Volume 26, Number 26 3 Global wheat production