Wheat Outlook January 6, 2017 Volume 26, Number 02

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1 Market Situation Today s Newsletter Market Situation Crop Progress 1 Weather 1 Grain Use 4 Commitment of Traders 5 Marketing Strategies 217 Wheat Marketing Plan 8 Upcoming Reports/Events 9 Crop Progress. USDA has suspended its weekly crop condition updates until early April. Reports from selected winter wheat producing states will still be available on a monthly basis over the course of the winter. Reports released January 3 rd for conditions as of the end of December show declining crop conditions in Kansas, Oklahoma, Montana, and Colorado. These states accounted for half of the U.S. winter wheat crop last year. While Texas did not report specific wheat crop condition ratings, USDA s Crop Progress State Stories notes that some winter wheat suffered in dry areas of Texas % of 217 Winter Wheat Rated Poor and Very Poor (accounted for 5% of 216 winter wheat production) Kansas Oklahoma Montana Colorado 24-Oct 31-Oct 7-Nov 14-Nov 21-Nov 28-Nov 3-Jan USDA, NASS, Crop Progress and State Crop Progress Reports 1/3/217 Weather. A comparison of drought monitor maps for the last 2 months shows the increasingly dry conditions in many wheat producing areas of the Southern High Plains. Severe to Exceptional drought conditions cover 56% of Oklahoma and 14% of Kansas. Colorado drought ratings are basically unchanged as improving conditions in the west have offset deteriorating conditions in the wheat producing east. 1

2 Drought Conditions % rated D2-D4, Severe to Exceptional Colorado Kansas Oklahoma Texas 4-Oct 1-Nov 6-Dec 3-Jan 2

3 Snowfall totals (Thursday through Saturday) in the range of 1 to 5 inches are expected to provide some precipitation for these areas with dry conditions to return again next week. Precipitation Forecast ( 7.shtml): Days 1 3 Day 4 5 The ENSO discussion this week from the Climate Prediction Center reports a reading of.3 C for the weekly temperature differential in the eastern Pacific. The current forecast path is for a mild La Nina event to be just about over by the end of February. ENSO Alert System Status: La Nina Advisory La Nina conditions are present. Equatorial sea surface temperature (SST) are below average in the central and eastern Pacific Ocean. A transition to ENSO neutral is favored during January-March 217. C Oceanic Nino Index (ONI) Actual Measurements Predicted 1. El Nino.5 Neutral. -.5 La Nina Latest actual weekly SST departure El Niño/Southern Oscillation (ENSO) Diagnostic Discussion, 2 January

4 Grain Use. Despite a strong dollar and plentiful export competition, U.S. wheat export sales are still on pace to reach USDA s target of 975 million bushels, 2 million bushels more than in the 215/16 marketing year. Wheat inspected for export out of the Texas gulf is very near normal. 216/17 U.S. All Wheat Export Sales Commitments Mil bu Projected MY Total 1, Cumulative Net Sales Weekly Net Sales Sales pace to reach target: 9.8 Export Sales Commitments for the week 12/29/216: 7 million bushels Total Export Sales Commitments this marketing year: 77 million bushels 79% of the 216/17 MY Export Sales Target of 975 million bushels (December WASDE) Normal sales commitments by the end of December: 76% USDA, Foreign Agricultural Service: Wheat Inspected for Export, Texas Gulf 1, bu 3, MY to date 16/17 to 15/16: +1% 16/17 to avg: -11% 25, 2, 15, 1, 5, 6/2 7/2 8/2 9/2 1/2 11/2 12/2 1/2 2/2 3/2 4/2 5/2 AVG 215/16 216/17 U.S. Dept. of Agriculture, Agricultural Marketing Service. Grain Transportation Report. January 5, 217 4

5 Wheat priced as a feed grain is 87% the price of corn, about on par with grain sorghum in the central Texas panhandle. $/cwt Cash Feed Grain Prices Triangle Area, Texas High Plains Corn/cwt Wheat/cwt Sorghum/cwt USDA, AMS, State Grain Reports Commitment of Traders. The Commitment of Traders report released today shows more bullish positioning by money managers to start the new year. For the four contracts monitored here, long positions increased 8,73 and short holdings decreased by 5,249 for a net long increase of 13,952. Soybeans and hard red Kansas City wheat are still the only contracts that are net long overall. The price changes on Tuesday compared to the week before were down for wheat and soybeans and up slightly for corn. Managed Money, net long positions 2 Dec 27 Dec 3 Jan contracts price change Corn (95,526) (19,62) (94,34) 15, Soybeans 111,993 17,293 98,254 (9,39) (19.75) Chicago Wheat (113,534) (119,665) (114,619) 5,46 (3.) KC Wheat 3,551 8,738 11,115 2,377 (4.75) Total (93,516) (113,236) (99,284) 13,952 5

6 Net Long Contracts 3, 2, 1, (1,) (2,) (3,) Speculative Investment in Corn 5 Jan 26 Jan 16 Feb 8 Mar 29 Mar 19 Apr 1 May 31 May 21 Jun 12 Jul 2 Aug 23 Aug 13 Sep 4 Oct 25 Oct 15 Nov 6 Dec 27 Dec Net Long Price Price, /bu Speculative Investment in Soybeans Net Long Contracts Price, /bu 25, 12 2, , , 1 5, 95 9 (5,) 85 (1,) 8 5 Jan 26 Jan 16 Feb 8 Mar 29 Mar 19 Apr 1 May 31 May 21 Jun 12 Jul 2 Aug 23 Aug 13 Sep 4 Oct 25 Oct 15 Nov 6 Dec 27 Dec Net Long Price 6

7 (2,) (4,) (6,) (8,) (1,) (12,) (14,) (16,) (18,) Speculative Investment in Chicago Wheat Net Long Contracts 5 Jan 26 Jan 16 Feb 8 Mar 29 Mar 19 Apr 1 May 31 May 21 Jun 12 Jul 2 Aug 23 Aug 13 Sep 4 Oct 25 Oct 15 Nov 6 Dec 27 Dec Net Long Price Price, /bu Net Long Contracts 2, 1, (1,) (2,) (3,) (4,) Speculative Investment in KC Wheat 5 Jan 26 Jan 16 Feb 8 Mar 29 Mar 19 Apr 1 May 31 May 21 Jun 12 Jul 2 Aug 23 Aug 13 Sep 4 Oct 25 Oct 15 Nov 6 Dec 27 Dec Net Long Price Price, /bu

8 The spread between March and May Kansas City wheat futures contracts is 12 cents today, right at full carry for that 6 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. I Qtr Jan 6 Jan net change % change MAR 17 KC Wheat % MAY 17 KC Wheat % Difference % Carry 87% 96% 8% MAR to MAY JUL 17 KC Wheat % Marketing Strategies 217 Wheat Marketing Plan. I have not yet priced any new crop wheat. I am waiting to see if we get any price strength from what looks to be fewer acres in 217 and a drier than normal weather outlook this winter. The July contract is trying to turn around the downward trend in place since last spring with the close the last two days>4 day moving average>9 day moving average>18 day moving average. 8

9 /bu 7 July 217 KC Wheat and Marketing Plan Early Season Price Rally / Early Crop Conditions Emerging from Dormancy/Late Season Conditions Harvest /2/216 5/11/216 5/2/216 6/1/216 6/1/216 6/21/216 6/3/216 7/12/216 7/21/216 8/1/216 8/1/216 8/19/216 8/3/216 9/9/216 9/2/216 9/29/216 1/1/216 1/19/216 1/28/216 11/8/216 11/17/216 11/29/216 12/8/216 12/19/216 12/29/216 1/1/217 1/19/217 1/3/217 2/6/217 2/13/217 2/2/217 2/27/217 3/6/217 3/13/217 3/2/217 3/27/217 4/3/217 4/1/217 4/17/217 4/24/217 5/1/217 5/8/217 5/15/217 5/22/217 5/29/217 6/5/217 6/12/217 6/19/217 6/26/217 7/3/217 7/1/217 Upcoming Reports/Events. January 8 14 January 1 January 12 January January 27 September 18 2 October 2 3 October October 3 31 The Executive Program for Agricultural Producers, information available at tepap.tamu.edu Short term Energy Outlook Crop Production WASDE Grain Stocks Winter Wheat and Canola Seedings Feed Grain Marketing Plan Workshop, Amarillo Cattle on Feed Master Marketer, Uvalde San Antonio area 9

10 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 1