Producers' Watch

Nearby Wheat; Deferred Corn; Soybeans a Wild Card


Let's start with Hard Red Winter Wheat.  Sometimes a picture (or chart) is worth more than words.

In the midst of weakness in Corn and Soybeans, Wheat is stronger, having posted a 3 Year High of $5.98'6 just 5 days ago on August 7th.  

Like Corn and Beans in July, Wheat futures were also impacted by geopolitical risk/trade wars; however, the fundamentals driving the Wheat markets cannot be ignored.

  • US All Wheat Production down 4 mbu at 1,877 million bu.
  • Food use in the US is up 5 mbu to 970 million bu.
  • World Wheat Production down to 729 from 758 MMT YA, due to lower production in Europe
  • World Wheat Ending Stocks at 258.96 MMT (down ~2 MMT from Last Month)

HRW081218With a recent rally in FH August (unlike Corn and Beans) taking Wheat to 3 year highs, Wheat farmers might consider selling some of both old crop and new crop. 

The base price discovery period on Crop Insurance for Wheat is Aug15-Sept14 and with prices generally higher than last year, (especially in relationship to Corn and Beans) we should see more Wheat acres next year for the 1st time since 2014.   If we do see an increase in Wheat acres this Fall, the battle for acreage this Spring between Corn and Beans will be interesting.

Corn and Soybeans will have yield increases above expectations for the 4th consecutive year.  It may take some time for the futures markets to bounce back.  Right now, the ratio between December '19 Corn and November '19 Soybeans is ~2.25:1.  In my opinion, if Spring of '19 planting season were upon us now, one might see more Corn Acres planted than Soybeans due to a $4.00 Dec '19 Corn Futures and a more stable demand base in the U.S. with Ethanol and Feed Demand; however, Soybeans are a huge Wild Card.  If Trump makes progress in trade negotiations with China, the markets will react favorably led by Soybeans.

In Short:

If you are storing Wheat or intend to plant Wheat, be agile and disciplined in marketing as the market is demanding attention right now.  With Corn, there will be opportunities ahead, but weather today is less of a factor than it was three to four weeks ago, and without news of a successful trade negotiation, the corn market may chop sideways through harvest until the January Crop Report of 2019.  I suspect rotations will still impact planting decisions on Soybeans more than the Corn:Soybean price ratio, but one can never underestimate the power of the "stroke of a government pen", especially when the growth story of China's demand for Soybeans continues, only with a tariff for the time being.

Check out Gavilon's Producers' Edge program to market a portion of your grain.  I hope you have a safe and bountiful harvest!

 

News, commentary, data, charts, research reports, ratings and analyst opinions and other information provided on this page are the opinions of the authors and intended for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell, or a recommendation or endorsement by Gavilon of any product, service or investment strategy. Gavilon makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from its use.



 

Topics: Grain Marketing Programs

Rob Huston, Vice President

Written by Rob Huston, Vice President

Vice President, Origination at Gavilon Group, LLC. An innovative leader with a successful background in risk management, sales & digital marketing, futures, options and OTC Derivatives. More than 20 years of successful, progressive experience with a demonstrated performance record and diversified management expertise.

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