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Wheat Outlook - Fall rally is time to price wheat

Modest expectations are in order for now.

There’s no reason to believe the wheat market has potential for big gains into 2018. But it’s not time to throw in the towel yet on either old crop in storage or new crop planned for harvest next year.

Seasonal trends suggest growers have a few more weeks to wait for opportunities. The signs aren’t all bearish, though it’s hard to be very bullish either.

With the last flush of old crop hitting the market as farmers empty bins to make room for corn and soybeans, basis should begin firming soon. Already some of the big carries offered in winter wheat futures are shrinking and hard red winter wheat was firmer last week.

USDA made no change to its forecast for 2017 crop ending stocks in its Sept. 12 report. Exports still look like they have potential to be better than the government forecasts though any big change may be modest, on the order of 25 to 50 million bushels. Summer feed usage will be estimated after the agency’s quarterly stocks data on Sept. 29. This number is always murky, because big summer numbers are later usually winnowed down by negative “residual usage.” Though corn was cheap this summer, wheat was even cheaper for Plains feedlots.

But demand won’t grow much without weather problems around the world that shrink exportable supplies. There’s a lot of smoke already on that front.

Australia’s crop is smaller, with rainfall forecast to be fairly spotty over the next two weeks after below normal precipitation over most of the growing region during the past 30 days.

Argentine acreage looks lower due to floods. Development of La Nina cooling of the equatorial Pacific now forecast through winter is associated with below average yields for corn and soybeans according to our analysis, though impact on wheat is less clear.

Precipitation for seeding winter wheat in China is below normal. Irrigation can make up some of the shortfall. China still has big reserves of ordinary wheat but imports of higher quality classes are on the rise.

Rainfall across much of the Black Sea winter wheat breadbasket this fall is also below normal. Ukraine is hardest hit so far and parts of Russia are trending wetter in a region known for boom or bust production.

Soil moisture in France is also short after a dry summer.

Here in the U.S. some of the dry parts of Kansas are due for two to three inches over the next week. Totals in the eastern half of the state will be less, however. Parts of the soft red winter wheat growing region from Missouri into Illinois and eastern Indiana are also dry.

Crop insurance base prices for winter wheat -- $5.02 for SRW, $4.87 for HRW – are 28 cents more than a year ago, but not nearly high enough to encourage seeding. While new crop futures enjoy a premium to old crop thanks to carry, the steep drop in prices from summer highs may limited the expansion were found in our survey, done in late July and early August.

Focus first on stepping up pricing on old crop inventory. Winter wheat has potential for $4.80 to $4.90 December while a move in Minneapolis above $6.65 could trigger a run back to $7 for the nearby.

For the complete version of this outlook, including supply and demand tables and graphics, along with price charts, click the “Download” button below.

More from Farm Futures:

Corn Outlook
Soybean Outlook

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Market Review on he writes weekly reviews for corn, soybeans, and wheat futures that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.

TAGS: Outlook Wheat
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