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Honored Advisor

Wheat where is it going?

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Other than the quick answer--"into the calves mouth".  

We are wrapping up the midwest portion of harvest and moving north.  As for now it seems to be a fairly dissapointing affair.

A fair amount is going into livestock feed, by way of the corn shortage.

The export business here at harvest seems pretty good.

Comparatively to soy & Corn the price does not seem that high

Basis is strong historically----------our area is -30 KC at elevators where most years it would be -60.

Is it going to sneak out the export door while all eyes are on corn country?

 

Anybody got something better to base marketing of wheat on.\?

 

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Veteran Advisor

Re: Wheat where is it going?

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I would guess that commercials want to get as much cash as possible and then get it hedged and earn the carry ......was not that long ago that the 12 month carry in futures was 85-95.....now...down to high 50's in Chicago....

 

as a farmer, you have to worry that once they have completed the bulk of that business, basis values are likely to relax...

 

now, many things could change that scenario depending on the outcome of weather...

 

but it's going to be interesting as heck!

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Senior Contributor

Re: Wheat where is it going?

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I don't know where it's headed, but I do know I'm selling mine off the combine for a couple of reasons.  First, my yields were just a tad north of 70.  Second, like you said the basis is very favorable.  Third, I'm not concerned about the carry as I need every ounce of storage I have for corn which is a lot more profitable to store than wheat. 

 

I really don't know what's going on in terms of  basis, but I'm starting to wonder if wheat isn't heavily displacing corn here locally.  Monday, the local coop was posting 20 over for corn.  Today, they changed their basis to just 5 over.  Unless an etoh plant turned a bunch back, I suspect some feeders turned some back opting for wheat. 

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Senior Advisor

Re: Wheat where is it going?

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Corn is going to carry wheat - period. If the weather pushes corn north wheat will ride along. For export to the Pacific Rim corn is worth about a $1 more for 60 lbs than wheat in the PNW (soft white). Wheat is $7.20 delivered to Portland today. More corn grown here all the time under irrigation with the highest yields in the nation and collecting the Portland premium.

 

If you know what the weather will do to corn in the next month you have it made.

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Honored Advisor

Re: Wheat where is it going?

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Palouser,

Is what you are saying like this.  Corn is the shorter(less stock) commodity and the more important.(disregarding the profit per acre potential, but just bushel vs bushel).   Wheat cannot muster any more value than corn/ will just go along with corn? 

That would be a big fundamental change in commodity values.  

----------------------------

 

I think there might be a time for corn when it looses value because it is not for sale----------like the new cadilac roadster that the dealer cannot get, it has no value if there is no PHYSICAL trade happening (something we might be seeing if the basis for corn is coming down a bit).  Without trades basis is a guess or just a hope.

Shouldn't the replacement commodity trade find it's own direction. Or are the other uses for wheat going to dry up to supply the feeding industry.----------------Tramping a little out of reality here, but I am seeing options I have not seen before.

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Senior Advisor

Re: Wheat where is it going?

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The reality is that wheat has many of the same uses as corn. You can feed it, make ethanol from it AND use it for human consumption. Corn can't conveniently replace wheat for human consumption under normal circumstances because the products made tend to depend on attributes that only wheat has (and the cultural bias and distribution for wheat).  

 

Another possibility is many areas around the globe are suited for wheat and it's widely distributed as a crop. Corn is less so. Europe grows corn but it's better suited for wheat - and feeding wheat is common throughout Europe and northern Asia. The Midwest is very unique. It's temperate, but it's tropical country in the summer. Corn and soy is king. The West is better for wheat if there's no irrigation - generally speaking. We grow plenty of both but the globe is more dependent on corn and soy for feed from us because we grow so much so easily. Ethanol buyilt the fire because of the dream of fuel self sufficiency - or at least as a contribution to our security. I don't think the rest of the globe can easily replace whar was our 'free' supply of corn. And yet most of the world doesn't wwant to replace wheat with it. Wheat is inherently more political and identified with food security in the Western world and beyond.

 

I think corn is more supported by new demand for ethanol and dietary improvement (meat) for the relatively new developing countries - China being of course the most outstanding example. I do think wheat is being taken for granted in the short run, but when corn goes short for some reason under current situations wheat will be too, as a feed stock. Wheat took corn for a ride in 2008. Corn is returning the favor. The big issue is if we ever have supply problems for both wheat and corn at the same time. It will be the 70's all over again. Adjust the prices after the Russian grain deals for real value today and compare them to the current prices and what's going on now will look absolutely unremarkable, tempered a bit for yield changes.

 

Because the major production areas for wheat are more distributed it's not as likely to have the fluctuations compared to corn where N America is such a dominate supplier. But since grains are connected they won't operate absolutely independently either.

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Senior Contributor

Re: Wheat where is it going?

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    Eloquently put Palouser,If wheat and corn would suffer global shortages at the same time and likly soy would suffer from the same conditions causing the others! Price uninhibited would make 74 and 07 look like a bagain. Hence  if a corn induced rally continues and wheat hits 8-9 portland,it would be conducive to production strength both in acrage and inputs.Not a lot of money but a gratification for product. (This is what the market seems to avoid if at all possible!)

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