Wheat Market Outlook
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
Market Situation U.S. and world wheat supplies were increased slightly in this morning’s World Agricultural Supply and Demand Estimates. Exports were the only supply or use category changed by USDA this month where a 25 million bushel reduction raised carryout by a like amount.
U.S. Wheat Supply and Demand, 3/10/2011 Million bushels
2,500
2,000
1,500
1,000
500
0 Beginning Stocks +0
Production +0
Imports
Domestic Use
+0
=
+0
Exports -25
Ending Stocks +25
2009/2010
May 10/11
Jun 10/11
Jul 10/11
Aug 10/11
Sep 10/11
Oct 10/11
Nov 10/11
Dec 10/11
Jan 10/11
Feb 10/11
Mar 10/11
World wheat stocks were increased with higher production (+2.19 mmt, primarily Argentina and Australia) and a reduction in use (‐2.21 mmt). The net effect was to raise the estimate of days of use on hand at the end of the marketing year from 98 days last month to 100. Trade expectations ahead of the report were for a small decrease in both U.S. and world ending stocks. Instead, the U.S. wheat ending stock number was at the high end of the range of estimates and the world number above the highest trade guess. In response, the wheat market extended its run of consecutive losses to four days, down over 10 cents today in both Chicago and Kansas City in the nearby contracts.
1
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
World Wheat: Days of Use on Hand 140
120
106 100
100
80
60
40
20
0
Days of Use
Average
3/10/2011
March 2010 WASDE and Pre-Report Trade Expectations U.S. Ending Stocks March
Avg
Range
Feb
2009/2010
Corn (mil bu)
675
667
625 to 702
675
1,708
Soybeans (mil bu)
140
141
121 to 181
140
151
Wheat (mil bu)
843
809
751 to 843
818
976
37
37
Sorghum (mil bu) Rice (mil cwt)
52.8
32 to 41 Not available
37
41
52.8
36.7
World Ending Stocks (mmt) March
Avg
Range
Feb
2009/2010
Corn
123.14
121.63
120.0 to 122.51
122.51
145.16
Soybeans
58.33
59.19
58.0 to 60.0
58.21
60.17
Wheat
181.9
177.569
175.2 to 179.2
177.77
197.6
Rice
98.78
93.85
94.26
Not available
2
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
The condition score of the Texas wheat crop increased slightly this week with 2 percentage points moving from the very poor category to the poor. Since late January over half of the Texas wheat crop has been rated in the two lowest classifications. The current track of the crop index is just above that of 2009, a relatively poor year for Texas wheat.
2011 Texas Winter Wheat Condition Ratings and Average Wheat Yield/% Harvested %
CCI
100
500
90
450
80
35 bu/62%
400
70
350
60
300
50
250
40
200
25 bu/38%
30
150 100
10
50
0
0 10/24 10/31 11/7 11/14 11/21 11/28 12/5 12/12 12/19 12/26 1/2 1/9 1/16 1/23 1/30 2/6 2/13 2/20 2/27 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3
20
Very Poor
Poor
Fair
Good
Excellent
2011
2010
2009
This week’s Drought Monitor shows 92% of Texas under some degree of drought conditions with Kansas at 80% and Oklahoma 100%. A crop condition comparison shows 41 percent of the Oklahoma wheat crop and 40 percent of the Kansas crop rated very poor and poor. The 30‐day precipitation outlook is for continued below normal rainfall over Texas and Oklahoma with equal chances for normal amounts in Kansas. USDA will resume its national crop ratings in early April.
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Wheat Market Outlook March 10, 2011 Volume 20, Number 18
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Wheat Market Outlook March 10, 2011 Volume 20, Number 18
Wheat futures in all three exchanges were lower today in response to the Supply and Demand numbers. Since last Friday’s close, July Kansas City wheat is off 89 cents or almost 10 percent.
Futures May ‘11 KC Wheat
Friday March 4 9.2850
Thursday March 10 8.3700
Net Change ‐0.9150
Percentage Change ‐9.85%
July ‘11 KC Wheat
9.3675
8.4750
‐0.8925
‐9.53%
July ’12 KC Wheat
9.0900
8.4850
‐0.6050
‐6.66%
Market Strategies Updating USDA’s 2011/2012 wheat balance sheet with today’s ending/beginning stocks number raises the carryover to use ratio for the 2011 crop by 1 percentage point, from 28.3 in late February at the Outlook Forum to 29.3%. This gives me an estimate of the July Kansas City wheat price at harvest of $7.61. 08/09 Planted Ac. (Mil. Acs.) Harvested Ac. (Mil. Acs.) Yield (Bushels) Supply
U.S. Wheat S&D March 10, 2011
63.2 55.7 44.9
09/10
10/11e
11/12p
59.2 49.9 44.5
53.6 47.6 46.4
57.0 47.5 43.8
- - Million Bushels - -
Beginning Stocks Production Imports Total Supply
306 2,499 127
657 2,218 119
976 2,208 110
843 2,080 110
2,932
2,993
3,294
3,033
255 1,005 1,015
150 986 881
170 1,006 1,275
175 1,020 1,150
Disappearance Feed and Residual Food and Seed Exports Total Use
2,275
2,018
2,451
2,345
Ending Stocks
657
976
843
688
Carryover/Use (%)
28.9
48.4
34.4
29.3
Avg. Farm Price ($/Bu.)
6.78
4.87
5.70
7.50
Closing Price, July KC futures
8.45
5.51
5.68
7.61
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Wheat Market Outlook March 10, 2011 Volume 20, Number 18
I expect a large increase in wheat supplies around the world in 2011 that will pressure prices lower over time. But I also anticipate additional pricing opportunities this spring with so much of the major winter wheat production area in the U.S. currently dry. My marketing plan calls for making additional sales in April to early May as we get more crop condition information. I am also watching long term seasonal average charts in the 2012 July KC wheat. When the 10‐ day moving average crosses below the 61‐day, I will make a small percentage of sales of that crop.
July 2011 KC Wheat and Marketing Plan ¢/bu
Early Season Price Rally / Early Crop Conditions
Emerging from Dormancy/Late Season Conditions Harvest
1100
1000
900
Sold 20 %
Sold 20 % 800
Sold 20 % 700
600
500
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. Texas AgriLife Extension Service assumes no liability for the use of this newsletter. 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
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Market Situation U.S. and world wheat supplies were increased slightly in this morning’s World Agricultural Supply and Demand Estimates. Exports were the only supply or use category changed by USDA this month where a 25 million bushel reduction raised carryout by a like amount.
U.S. Wheat Supply and Demand, 3/10/2011 Million bushels
2,500
2,000
1,500
1,000
500
0 Beginning Stocks +0
Production +0
Imports
Domestic Use
+0
=
+0
Exports -25
Ending Stocks +25
2009/2010
May 10/11
Jun 10/11
Jul 10/11
Aug 10/11
Sep 10/11
Oct 10/11
Nov 10/11
Dec 10/11
Jan 10/11
Feb 10/11
Mar 10/11
World wheat stocks were increased with higher production (+2.19 mmt, primarily Argentina and Australia) and a reduction in use (‐2.21 mmt). The net effect was to raise the estimate of days of use on hand at the end of the marketing year from 98 days last month to 100. Trade expectations ahead of the report were for a small decrease in both U.S. and world ending stocks. Instead, the U.S. wheat ending stock number was at the high end of the range of estimates and the world number above the highest trade guess. In response, the wheat market extended its run of consecutive losses to four days, down over 10 cents today in both Chicago and Kansas City in the nearby contracts.
1
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
World Wheat: Days of Use on Hand 140
120
106 100
100
80
60
40
20
0
Days of Use
Average
3/10/2011
March 2010 WASDE and Pre-Report Trade Expectations U.S. Ending Stocks March
Avg
Range
Feb
2009/2010
Corn (mil bu)
675
667
625 to 702
675
1,708
Soybeans (mil bu)
140
141
121 to 181
140
151
Wheat (mil bu)
843
809
751 to 843
818
976
37
37
Sorghum (mil bu) Rice (mil cwt)
52.8
32 to 41 Not available
37
41
52.8
36.7
World Ending Stocks (mmt) March
Avg
Range
Feb
2009/2010
Corn
123.14
121.63
120.0 to 122.51
122.51
145.16
Soybeans
58.33
59.19
58.0 to 60.0
58.21
60.17
Wheat
181.9
177.569
175.2 to 179.2
177.77
197.6
Rice
98.78
93.85
94.26
Not available
2
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
The condition score of the Texas wheat crop increased slightly this week with 2 percentage points moving from the very poor category to the poor. Since late January over half of the Texas wheat crop has been rated in the two lowest classifications. The current track of the crop index is just above that of 2009, a relatively poor year for Texas wheat.
2011 Texas Winter Wheat Condition Ratings and Average Wheat Yield/% Harvested %
CCI
100
500
90
450
80
35 bu/62%
400
70
350
60
300
50
250
40
200
25 bu/38%
30
150 100
10
50
0
0 10/24 10/31 11/7 11/14 11/21 11/28 12/5 12/12 12/19 12/26 1/2 1/9 1/16 1/23 1/30 2/6 2/13 2/20 2/27 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3
20
Very Poor
Poor
Fair
Good
Excellent
2011
2010
2009
This week’s Drought Monitor shows 92% of Texas under some degree of drought conditions with Kansas at 80% and Oklahoma 100%. A crop condition comparison shows 41 percent of the Oklahoma wheat crop and 40 percent of the Kansas crop rated very poor and poor. The 30‐day precipitation outlook is for continued below normal rainfall over Texas and Oklahoma with equal chances for normal amounts in Kansas. USDA will resume its national crop ratings in early April.
3
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
4
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
Wheat futures in all three exchanges were lower today in response to the Supply and Demand numbers. Since last Friday’s close, July Kansas City wheat is off 89 cents or almost 10 percent.
Futures May ‘11 KC Wheat
Friday March 4 9.2850
Thursday March 10 8.3700
Net Change ‐0.9150
Percentage Change ‐9.85%
July ‘11 KC Wheat
9.3675
8.4750
‐0.8925
‐9.53%
July ’12 KC Wheat
9.0900
8.4850
‐0.6050
‐6.66%
Market Strategies Updating USDA’s 2011/2012 wheat balance sheet with today’s ending/beginning stocks number raises the carryover to use ratio for the 2011 crop by 1 percentage point, from 28.3 in late February at the Outlook Forum to 29.3%. This gives me an estimate of the July Kansas City wheat price at harvest of $7.61. 08/09 Planted Ac. (Mil. Acs.) Harvested Ac. (Mil. Acs.) Yield (Bushels) Supply
U.S. Wheat S&D March 10, 2011
63.2 55.7 44.9
09/10
10/11e
11/12p
59.2 49.9 44.5
53.6 47.6 46.4
57.0 47.5 43.8
- - Million Bushels - -
Beginning Stocks Production Imports Total Supply
306 2,499 127
657 2,218 119
976 2,208 110
843 2,080 110
2,932
2,993
3,294
3,033
255 1,005 1,015
150 986 881
170 1,006 1,275
175 1,020 1,150
Disappearance Feed and Residual Food and Seed Exports Total Use
2,275
2,018
2,451
2,345
Ending Stocks
657
976
843
688
Carryover/Use (%)
28.9
48.4
34.4
29.3
Avg. Farm Price ($/Bu.)
6.78
4.87
5.70
7.50
Closing Price, July KC futures
8.45
5.51
5.68
7.61
5
Wheat Market Outlook March 10, 2011 Volume 20, Number 18
I expect a large increase in wheat supplies around the world in 2011 that will pressure prices lower over time. But I also anticipate additional pricing opportunities this spring with so much of the major winter wheat production area in the U.S. currently dry. My marketing plan calls for making additional sales in April to early May as we get more crop condition information. I am also watching long term seasonal average charts in the 2012 July KC wheat. When the 10‐ day moving average crosses below the 61‐day, I will make a small percentage of sales of that crop.
July 2011 KC Wheat and Marketing Plan ¢/bu
Early Season Price Rally / Early Crop Conditions
Emerging from Dormancy/Late Season Conditions Harvest
1100
1000
900
Sold 20 %
Sold 20 % 800
Sold 20 % 700
600
500
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. Texas AgriLife Extension Service assumes no liability for the use of this newsletter. 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
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