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Honored Advisor

wheat May 22............

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It is always good to step back and look at the longest range chart you can find.

That harvest move in 2016 combined with the $1 down basis move is pretty prominent.  And this last year has been more volatile than would normally be expected from a crop that is "overproduced" and close to the loan rate in price.......

If you want a visual of extreme basis positions taken by those who merchandise wheat, notice the chart this last year never went below $4.25 @  but in western Ks we collected from 28 to 42 cents as the PCP was at $3.20 and below.  Which means the price to the farmer was around $2.80.

So......... I think that is emphasizes how seperated the markets are from production the actual pricing of grain to the producer.  We have to be aware of that to have a feel for value on the board.

 

Anyway the 4.35 + seems to be the place where strong resistance resides.  Not much here that looks new.

 

Rain and weather delays are now a negative to the small acreage wheat crop which has been headed out for a while with ample moisture.  Central Ks areas will loose some acres to drowning out and a few bushels to the washes affect on combines and carts.

 

I would like to now list those factors that will drive the wheat crop production up.................2017,,,,,,,,, its over...... argentina doesn't have enough acres to replace the reduction in acres here.  Australia may be looking at a good opportunity..

 Rain all summer delays planting into august and 2018 winter wheat becomes the only option...... Otherwise these full profiles on the plains will push the milo, sunflower, dry land corn, and forage acres up so much there won't be many acres left for wheat planting in the fall..... the most likely scenario ........ if not the market and basis will have to provide some strong incentive to use wheat acres for anything other than grazing.

 

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9 Replies
Honored Advisor

Re: wheat May 22............

Giving away the store here..................

 

Even KSU gets into the act .............. a good read with a great chart at the end that shows market volatility since the economic collapse of 2008... 

 

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter/wheat-market-outlook-mid-m...

 
"It is assumed by Kansas State University that these adjusted USDA projections for “next crop” MY 2016/17 have a 50% probability of occurring"
 
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Three Alternative KSU U.S. Wheat S/D Forecast for “Next Crop” MY 2017/18: As an alternative to the USDA’s projection, three potential KSU‐Scenarios for U.S. wheat supply‐demand and prices are presented for “next crop” MY 2017/18.
 
KSU Scenario 1) “Trend Yield” Scenario (25% probability) assumes for “next crop” MY 2017/18 that the following occurs. It is assumed that there will be 46.059 ma planted, 82.50% harvested‐to‐planted, 37.999 ma harvested, 47.0 bu/ac trend yield, 1.786 bb production, 3.070 bb total supplies, 1.000 bb exports, 180 mb feed & residual use, 2.200 bb total use, 870 mb ending stocks, 39.6% S/U, & $4.45 /bu U.S. wheat average price.
 
KSU Scenario 2) “Higher U.S. Wheat Exports” Scenario (15% probability) assumes the following for “next crop” MY 2017/18. Planted acres of 46.059 ma are associated with 39.334 ma harvested (82.50% harvested‐to‐planted), 47.0 bu/ac trend yield, 1.786 bb production, 3.070 bb total supplies, 1.150 bb exports, 180 mb feed & residual use, 2.350 bb total use, 720 mb ending stocks, 30.6% S/U, & $5.10 /bu U.S. wheat averageprice;
 
KSU Scenario 3) “Short U.S. Wheat Crop” Scenario (10% probability)assumes the following for “next crop” MY2017/18. Planted acres of 46.059 ma, 80.60% harvested‐to‐planted, 37.124 ma harvested, 40.0 bu/ac low yield, 1.485 bb production, 2.769 bb total supplies, 950 mb exports, 125 mb feed & residual use, 2.095 bb total use, 674 mb ending stocks, 32.17% S/U, & $5.00 /bu U.S. wheat average price.
 
 
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Advisor

Re: wheat May 22............

Scenario #4. 60 bu. At 7$. Then we'll get excited to go long. Lol. No honestly I'm seeing scenario 3. I hope not however 5$ + for 40+ bu seems realistic. Good read though; keep us informed on the updates thanks.
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Honored Advisor

Re: wheat May 22............

KSU's work is several days and more rains back but I think their work lays out a very good representation on how to view the "projections" from usda......

 

I would disagree with them just to the point that Scenario #3 is becoming closer to 35% probably and usda is down to that point or below as time passes and the waters keep rising.

For the most of the wheat belt todays forcast does not look good.

I think the temperature half of this is as troubling for us as the rain......

 

 weather projections.jpeg
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Veteran Advisor

Re: wheat May 22............

IMO that forecast looks good for wheat here.  Cooler temps + longer fill period, and plenty of moisture for it.  That's what resulted in lasts years tremendous yields in western KS.  I also saw an extended (June-August) forecast which showed more of the same.  Should result in excellent fall crop for this "fringe" area.  here profitability is more a result of more bushels, rather than price.  I'd like to hear your thoughts, SW.  Am I off base?  

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Veteran Advisor

Re: wheat May 22............

as I type this.......it's raining......I know big supprise !!!   so far at least half an inch.  I think i'm going to get me one of those "home made"

wx stations I talked about on another thread and put them at a couple of locations.....

 

Nice little article SW.........I think there is one thing that we're not factoring in.......the "china syndrome"........I noticed that wheat supplies

will actually tighten some, if we leave the china data out....yet, as you pointed out, we did a very good job of exporting, for a situation

of "the world is awash in wheat" @copyright ElCheapo 2016.........we did a very good job of getting rid of it........doesn't that kind

of strike you just odd.....I remember several elevator outfits saying "we have such a low basis because nobody wants it, and we can't

get rid of it".......hmmm that's interesting.

 

I wished I was smarter and better at marketing.......the last several years my crystal ball is cracked, and pitted, and part of it

is being held on by duct tape.....but I think in this "mind set"......we will now need to "prove it to them", and that might take a

few months after harvest.....maybe sept quotes ?  it would give the time for stuff to clear out of the market, and being lead

contract in august, when decisions will need to be made if planting, and some premiums might be needed to plant (although

we could see that occuar in the july 2018 contracts.

 

my "gut feeling", yes there is going to be good wheat this year, as clayton said, this is excellent wx for wheat filling......we could

see some "big wheat", which should lower protein levels, so if you have some good high protein wheat......have the wife

guard the bin with the 12 guage.  but, you'll need to bin it, and chances will be it will not go to local elevator.....for me a

minium of 70 miles, or 250 miles to the east. I need to check the protein premiums at kc.

but......I think in ok and tx, some wheat was grazed out, or just plain put out of it's pain with a shot of roundup.  The western 1/4 of

Kansas, is the unknown......yes it could come back, yes it's going to be a nighmare cutting, but continued cool most conditions,

would allow it to do a bit better.

BUT......those same conditions, can lead to a lot of disease.....yes we can spray.......but at $3.50 wheat, and so much uncertain stuff,

many have opted to spend another $20 an acre.

 

overall we SHOULD have lower carryout......lowest acres in 108 years........that in and of itself should be enough to support the

market, but those in Chicagoland didn't study history.........I really don't believe technology and cropping systems could account

for a larger crop this year, than 108 years ago....yes better yields, but that's a lot of acres difference.

 

looking at the data.......one would "think" one sould go long the market, but that's very very hard to do, here before

harvest, where there is a very strong seasonal for wheat to go down.......

 

it could be that we will go down as usual.........but then we need to bepaired to go long.....I know, all of has to sell some

at harvest to pay bills...........I understand, i'm one of them, but might be time to buy put or go long a contract, which

is best, I don't know.

 

What is a question to puzzle on, will there be any wheat planted this fall ? other than what is planning to be grazed out ?

 

but for that matter........is there anything that pencils out any better in the plains ?

 

 

 

 

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Honored Advisor

Re: wheat May 22............

I agree on an individual basis.......... the cool conditions are going to help fight off a few problems like the lodging and the acres that came up in the spring..  But won't help the disease issues....   and on an individual basis there are going to be some great fields in areas ..... like my favorite drive from mineola to dodge, some of that wheat is going to shine...except for low spots......

 

I base most of my thought on the reduction in acres and the number of fields that are already gone or waiting for summer crop that would normally be wheat.  From dodge to great bend there are a few very good fields also and some already sprayed.. and a lot of standing water drowning out.  The southern 54 hwy stuff looks pretty good..... The Salina area not so good.  When you drop planted acres by 20% from last year when we claim a 52 bushel yield, everything is going to need to be excellent to hold bushels as high as they are projected...

 

Average is still going to be low in the west...

 

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Moisture and water for western Ks........................

For fall crops is where we are really in great shape...... thinking dry land....  ..... with our crop options and growing season..... We have a profile like we seldom see and plenty of time to fill in the washed out ditches.  Planting with good results has another 6+ weeks with milo as an option.  Planters will run and even double crop milo in the wheat will have 80 bushel potential.  The limit will only be planting days available.......thats too wordy    .I agree with you on the fall crop.

Our yields won't help the corn belt if they come up short, but it will make us feel better... and help make up for irrigations late planting.

 

Part of what I gain, personally, by doing some hedging and "buying back" and keeping my head in the market is a seperation between production and pricing.  So the comments just made are totally about production.  In Sw Ks good production is success.  But from the position of markets,,,,,,,, I don't know if we can grow a profit in the present climate where we can't reduce expenses enough and all form of taxation is rising.

 

Have you driven through clark county......... wow it is beautiful.......      It will take forever to get the fences and losses back but nature is on steroids this spring.

 

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Honored Advisor

Re: wheat May 22............

Cheapo,

Yes it is more than just a little bit odd.  we will hit those export numbers and still have a few (wetter than desired leftover piles of poor quality wheat.

The volatility in the market as well since last crop is odd for a crop that was so cheap that it paid an LDP and went into ground piles to make room for corn in the elevator because it was cheaper than corn.

Those are just not the history of overproduction....... 

 

The protein bonus,,,,,, one of those mirages a producer gets credited for recieving in the press, but never sees the check......  Robbery by those guys that butter you up to bring it to their elevator.

 

 

Going long.................. Very shortly wheat could be the very thing we want in the bin.    I have never made anything holding actual wheat over 6 months.  But a couple of times I have bowed my neck and put the whole crop in a bin(with a corn crop coming).  Then taken the usda loan if I needed the cash flow............ and pocketed $1.00 to $1.50 gain in 60 days. (and it still went to a local feedlot ration in time for corn)

And this has the potential to be one of those years.

I don't like handling it that much but the risk is not that high with the market so close to the loan rate.

 

It is really disturbing how bad the price is to the farmer now.....Today wheat is $3.49 which is up from last year........ But I can price corn for fall delivery now at $4.05 (ethanol).  Corn has a nice carry bonus.  But that differential is not good.

 

 

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NEWS to WATCH   --------- The beef deal being talked with China....... Beef exports is one of those issues that floats a lot of boats. ( helps several commodities.)

 

 

 

 

 

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Veteran Advisor

Re: wheat May 22............

SW.....just to keep you hopping about, take a look at these numbers

 

www.ams.usda.gov/mnreports/SJ_GR110.txt

 

that's ain't too bad for corn, wished we had more stills around us.

 

there is a new trend around here, we have a number of people that are planting open pollinated corn (seed runs $90 a bag

or less, that's why they plant it), right into wheat stubble fallowing wheat harvest......I just can't believe it every time I see

it, but dang it, it makes !!!  and runs 60 to 80 bu and acre....and they either cut it, or graze it.

 

i'm tempted to try some this year, only thing holding me back, don't have a combine with a corn head

 

like to try some sunflowers after wheat, but at $300 a bag plus...........that just plain ole scares me

 

 

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Honored Advisor

Re: wheat May 22............

decent prices and your close enough that the freight might not be too bad.

 

corn heads are easy to find.  Most dealers have a few on the lot they will rent to get some cash flow.

 

I am 150 miles south of you and west enough to be at 3000 ft elevation.  So our wheat harvest is done before yours and our growing season is longer.   We have a 20 inch average rainfall but this close to the mountains that means you get either 12 inches or 3o inches so....... You take advantage of your opportunities... We planted nothing but wheat through the drought because it was cheap and we knew it was going to fail in the spring, but would prevent blowing ground in the winter if it had a little rain.  Honestly, double cropping was my dads favorite...He loved to do it because it meant we had a full profile of moisture like this year, and he could make up for the poor year. If we would have had chemical fallow back then there would have been every acre of wheat planted back on a year like this...  Dry land milo or corn work better than sunflowers...  sunflowers can struggle to get a stand on hot days and look like candy canes coming out of the ground to a rabbit or pheasant.  herbicides are difficult on flowers and if you dry out they take a lot out of the ground and don't leave much for stubble.  We are sandier than you...

 

I wouldn't let that cornhead slow you up a bit.  When you have a good crop standing out in the field, you'll figure something out.

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