Wheat Market Outlook 2010 Winter Wheat Condition Ratings
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
Market Situation USDA included crop conditions for U.S. winter wheat in this week’s Crop Report. The crop is getting off to a good start with just over 60 percent in the good and excellent categories. Only five percent was rated as poor or very poor.
2010 Winter Wheat Condition Ratings %
CCI
100
500
90
450
80
400
70
350
60
300
50
250
40
200
30
150
20
100
10
50
0
0
Very Poor
Poor
Fair
Good
Excellent
2010
2009
In Texas, the wheat condition score increased slightly this week, up 3 points to 336. The crop condition score at this time last year was 346. Many of the hard red winter wheat growing areas received rain this week which should boost condition scores next week. However, continued wet weather in soft wheat country (eastern half of US) is delaying plantings, some of which may not get planted at all.
1
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
2010 Texas Wheat Crop Condition Rating Rating
CCI
100%
500
90%
450
80% 400 70% 60%
350
50%
300
40%
250
30% 200 20%
Very Poor
Fair
Good
6/28
6/21
6/7
2010
6/14
5/31
5/24
5/17
5/3
Excellent
5/10
4/26
4/19
4/5
4/12
3/29
3/22
3/8
3/15
3/1
2/22
2/8
2/15
2/1
1/25
1/18
1/4
Poor
1/11
12/3
12/10
11/26
11/18
11/4
11/11
100 10/28
0% 10/20
150 10/13
10%
2009
2
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
It rained this week in the Australian wheat belt. But in a situation to which many Texas producers can relate, the most rain came where the drought was the worst and they are now trying to harvest (the northeast production areas). The further south and west you go in wheat country, the more likely the moisture was beneficial to this year’s crop.
The supply of world wheat is adequate given current demand projections. As such, wheat prices will likely be more of a follower of other markets than a price leader. One market that may be set to influence other grains is rice. World rice production in the 2009/10 marketing year is projected at 433.51 mmt, down from 444.85 mmt the year before. Rice use is projected to increase, from 435.83 mmt in 2008/09 to 438.14 currently. The stocks to use ratio for rice is estimated at 19.5 percent, down from 20.6 percent last year. In Commodity News on Thursday, a daily market analysis put out by the CME Group, attention was drawn to the possibility of a significant increase in rice imports by India. While India is the world’s second largest consumer of rice, it is a minor player in world trade. According to USDA PSD data, India has imported virtually no rice over the last ten years and exports annually about
3
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
3.7 mmt. With this year’s drought reduced crop, USDA estimates Indian rice exports to fall to 1.5 mmt and its stocks to use ratio to be about 11 percent, the lowest since the 10 percent ratio in 2004/05 and well below the 30 percent levels earlier this decade.
India Rice, milled 000 mt
120,000 100,000 80,000 60,000 40,000
32%
20,000
11%
10%
0
Ending Stocks
Production
Domestic Consumption
Exports
Imports
After a sharp drop in rice production in 2009, some in the trade are speculating that India could enter the world rice trade in 2010 in a big way—importing up to 3.5 mmt. If this were to be the case, India would move from being a net exporter of rice to the world’s leading importer. A 3.5 mmt level of imports would be more than 10 percent of the expected world trade in rice which is estimated at 29 mmt. The sudden entry of a major new importer would strain rice stocks in a year when production is down and use is up. The likely spillover effect of this scenario would be added volatility in other grain markets.
4
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
2009/10 Rice Imports mmt
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Phillipines
Nigeria
EU‐27
Brazil
US
India, priv. est.
WAOB, S&D and CME
Kansas City wheat gave up 50 cents on the week but is up over prices at the end of September by over 20 cents on the nearby contracts.
Futures Dec ‘09 KC Wheat
Friday Friday Weekly October October Net 23 30 Change 5.4950 4.9900 ‐0.5050
Weekly Percentage Change ‐9.19%
October Net Change 0.2250
October Percentage Change 4.72%
July ‘10 KC Wheat
5.8825
5.3775
‐0.5050
‐8.58%
0.2225
4.32%
July ‘11 KC Wheat
6.4525
5.9525
‐0.5000
‐7.75%
0.1125
1.93%
Wheat Marketing Strategies Wheat continues to follow the trends in other grain markets. Supply questions related to 2010 acreage and condition and the size of the crop in the southern hemisphere are important, but
5
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
likely secondary to broader economic concerns. If economic indicators continue to edge upward, I expect price strength in commodities generally this winter and better pricing opportunities for wheat to follow.
July 2010 KC Wheat and Marketing Plan ¢/bu 750
700
Early season planting conditions Southern Hemisphere Crop Production 25%
Crop Emerging from Dormancy 25%
Late Season Conditions 25%
Harvest 25%
650
600
550
500
450
Mark Welch Texas AgriLife Extension Economist 401 C Blocker Building TAMU 2124 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 AgriLife Extension Service. Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating
6
Market Situation USDA included crop conditions for U.S. winter wheat in this week’s Crop Report. The crop is getting off to a good start with just over 60 percent in the good and excellent categories. Only five percent was rated as poor or very poor.
2010 Winter Wheat Condition Ratings %
CCI
100
500
90
450
80
400
70
350
60
300
50
250
40
200
30
150
20
100
10
50
0
0
Very Poor
Poor
Fair
Good
Excellent
2010
2009
In Texas, the wheat condition score increased slightly this week, up 3 points to 336. The crop condition score at this time last year was 346. Many of the hard red winter wheat growing areas received rain this week which should boost condition scores next week. However, continued wet weather in soft wheat country (eastern half of US) is delaying plantings, some of which may not get planted at all.
1
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
2010 Texas Wheat Crop Condition Rating Rating
CCI
100%
500
90%
450
80% 400 70% 60%
350
50%
300
40%
250
30% 200 20%
Very Poor
Fair
Good
6/28
6/21
6/7
2010
6/14
5/31
5/24
5/17
5/3
Excellent
5/10
4/26
4/19
4/5
4/12
3/29
3/22
3/8
3/15
3/1
2/22
2/8
2/15
2/1
1/25
1/18
1/4
Poor
1/11
12/3
12/10
11/26
11/18
11/4
11/11
100 10/28
0% 10/20
150 10/13
10%
2009
2
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
It rained this week in the Australian wheat belt. But in a situation to which many Texas producers can relate, the most rain came where the drought was the worst and they are now trying to harvest (the northeast production areas). The further south and west you go in wheat country, the more likely the moisture was beneficial to this year’s crop.
The supply of world wheat is adequate given current demand projections. As such, wheat prices will likely be more of a follower of other markets than a price leader. One market that may be set to influence other grains is rice. World rice production in the 2009/10 marketing year is projected at 433.51 mmt, down from 444.85 mmt the year before. Rice use is projected to increase, from 435.83 mmt in 2008/09 to 438.14 currently. The stocks to use ratio for rice is estimated at 19.5 percent, down from 20.6 percent last year. In Commodity News on Thursday, a daily market analysis put out by the CME Group, attention was drawn to the possibility of a significant increase in rice imports by India. While India is the world’s second largest consumer of rice, it is a minor player in world trade. According to USDA PSD data, India has imported virtually no rice over the last ten years and exports annually about
3
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
3.7 mmt. With this year’s drought reduced crop, USDA estimates Indian rice exports to fall to 1.5 mmt and its stocks to use ratio to be about 11 percent, the lowest since the 10 percent ratio in 2004/05 and well below the 30 percent levels earlier this decade.
India Rice, milled 000 mt
120,000 100,000 80,000 60,000 40,000
32%
20,000
11%
10%
0
Ending Stocks
Production
Domestic Consumption
Exports
Imports
After a sharp drop in rice production in 2009, some in the trade are speculating that India could enter the world rice trade in 2010 in a big way—importing up to 3.5 mmt. If this were to be the case, India would move from being a net exporter of rice to the world’s leading importer. A 3.5 mmt level of imports would be more than 10 percent of the expected world trade in rice which is estimated at 29 mmt. The sudden entry of a major new importer would strain rice stocks in a year when production is down and use is up. The likely spillover effect of this scenario would be added volatility in other grain markets.
4
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
2009/10 Rice Imports mmt
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Phillipines
Nigeria
EU‐27
Brazil
US
India, priv. est.
WAOB, S&D and CME
Kansas City wheat gave up 50 cents on the week but is up over prices at the end of September by over 20 cents on the nearby contracts.
Futures Dec ‘09 KC Wheat
Friday Friday Weekly October October Net 23 30 Change 5.4950 4.9900 ‐0.5050
Weekly Percentage Change ‐9.19%
October Net Change 0.2250
October Percentage Change 4.72%
July ‘10 KC Wheat
5.8825
5.3775
‐0.5050
‐8.58%
0.2225
4.32%
July ‘11 KC Wheat
6.4525
5.9525
‐0.5000
‐7.75%
0.1125
1.93%
Wheat Marketing Strategies Wheat continues to follow the trends in other grain markets. Supply questions related to 2010 acreage and condition and the size of the crop in the southern hemisphere are important, but
5
Wheat Market Outlook October 30, 2009 Volume 18, Number 86
likely secondary to broader economic concerns. If economic indicators continue to edge upward, I expect price strength in commodities generally this winter and better pricing opportunities for wheat to follow.
July 2010 KC Wheat and Marketing Plan ¢/bu 750
700
Early season planting conditions Southern Hemisphere Crop Production 25%
Crop Emerging from Dormancy 25%
Late Season Conditions 25%
Harvest 25%
650
600
550
500
450
Mark Welch Texas AgriLife Extension Economist 401 C Blocker Building TAMU 2124 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 AgriLife Extension Service. Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating
6
