Abundant U.S. Wheat Stocks Help Ease New Crop Weather Concerns

by Julia Debes, USW Communications Specialist

Last week, traders blamed the short run-up in hard red winter (HRW) and soft red winter (SRW) futures prices on concerns about weather conditions hurting prospects for the 2011/12 crop. While conditions are dry, the concern may have distracted the market from the fact that overall U.S. wheat stocks remain abundant.

The dry weather and above normal temperatures certainly increased the pace of U.S. winter wheat seeding. The United States Department of Agriculture (USDA) crop progress report showed 92 percent of the 2011/12 winter wheat crop seeded as of Oct. 31, compared to 81 percent in 2009 and a five-year average of 88 percent.

With little rain forecast through next week for most of the HRW production region, producers, traders and buyers alike will still keep a close watch on the weather.

USDA’s weekly weather and crop bulletin on Nov. 2 stated that generally dry conditions in the central and southern Great Plains are hurting HRW emergence. Even with less than optimal conditions, USDA reported 73 percent of winter wheat had emerged by Oct. 31, eight percent more than in 2009 but on par with the five-year average. However, Kansas Wheat reported on Oct. 29 that while early planted wheat has emerged well, it still needs more moisture to establish a good stand before the winter cold.

Dry weather also forced USDA to downgrade condition ratings for winter wheat. As of Oct. 31, 46 percent was reported in good to excellent condition, slightly down from last week and 18 percent below this time in 2009.

As reported in the Oct. 7 issue of Wheat Letter, however, USDA’s Quarterly Grain Stocks Report showed U.S. wheat stocks at their highest level since 1997. As of Sept. 1, there was 66.9 million metric tons (MMT) stored in all positions, 30 percent above the five-year average. The top three HRW producing states (Kansas, Oklahoma and Texas) all show increased available stocks both on and off the farm compared to last year at this time. Reuters reported on Nov. 3 that the market is shrugging off concerns about dry weather in the HRW and SRW wheat regions, but the reality of supply is also likely in play.

Perhaps the most important fact for buyers is that Rabobank’s Agri Commodities Monthly for October 2010 reported that FOB prices for exportable SRW Gulf were the lowest in the world due in part to recent currency recalibrations. Additionally, the USW Price Report for Oct. 29 shows that soft white (SW) FOB Pacific Northwest prices are close to parity with SRW FOB Gulf prices – and SW producers report generally good to excellent conditions for their crop.

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