The drought appears to be slowly declining in the hard red winter wheat (HRW) area. Just when you think that the wheat is going to keel over and die, it rains enough to keep most of it alive.
Reports indicate that the parts of the Texas Panhandle, Oklahoma Panhandle and western Kansas have the best potential wheat crop in years. But along parts of the Kansas/Oklahoma border, severe drought persists.
USDA's Nov. 13 Crop Condition Reports indicated that Texas winter wheat was 92 percent planted and 89 percent emerged compared to 89 percent planted and 70 percent emerged in 2005. The Texas crop condition index is estimated to be 77 this year versus 56 last year.
Oklahoma's winter wheat percent planted was 98 percent with 85 percent emerged compared to 95 percent planted and 80 percent emerged last year. Twenty-nine percent of Oklahoma's wheat crop is classified poor to very poor compared to 12 percent last year.
The Kansas report did not include a percent planted estimate but estimated that 94 percent of the wheat was emerged. Only five percent of the wheat was classified as in poor to very poor condition.
The reports indicate that both the Texas and Kansas crops are in better condition than last year's crops. Some analysts report that planted acres are expected to be about 10 percent higher in both states.
The 90-day forecast for most of the HRW Wheat Belt is for normal precipitation, which may be sufficient to maintain the Texas, Oklahoma and Kansas wheat crops. Overall, the 2007 U.S. winter wheat crop has the potential to be above average.
Since Sept. 28, the KCBT July '07 wheat contract price has been trading between $4.70 and $5 and most of the time between $4.70 and $4.90. Most elevators are offering between a minus 35 cents and minus 45 cents basis the July contract price for June '07 delivered wheat.
At this writing, the July '07 wheat contract price is about $4.90. Using a minus 40 cent basis produces a June 2007 price of $4.50. Elevator managers report that they have written more forward contracts than in past years.
Since Oct. 4, the KCBT December wheat contract price has been between $5 and $5.50. During this same time period, the basis has remained constant at about a minus 28 cents. At this writing, the December contract price is $5.22. It will take two consecutive KCBT December contract price closes below $5 for prices to establish a downtrend and two consecutive closes above $5.50 to establish an uptrend.
Besides the condition of the 2007 winter wheat crop, the market is watching U.S. wheat exports. For the 2006/07 wheat marketing year (June 1 through May 31) the USDA projects that all wheat exports will be 925 million bushels. As of Nov. 9, 513 million bushels of wheat had been sold for export and 354 million bushels had been shipped. For the first 23 weeks of the marketing year, weekly shipments averaged 15.4 million bushels. To meet USDA's estimate, weekly shipments must average 19.7 million bushels.
As of Nov. 9, 149 million bushels of HRW wheat had been sold for export and 91 million bushels had been shipped. This is an average weekly shipment of 4 million bushels. Between now and May 31, weekly HRW wheat export shipments must average 7.2 million bushels.
Wheat prices have stabilized in about a 40-cent price range. Barring weather surprises with the U.S. winter wheat crop or production surprises with Argentina or Australia's wheat production, prices should remain relatively stable. Between now and late winter, the odds of the KCBT March contract price ($5.31 at this writing) going above $5.60 or below $5 are relatively small.