By G.C. Mays
The USDA released its domestic wheat outlook report and reiterated that its estimate of ending wheat stocks are essentially unchanged from the previous month. However, crop conditions continue to deteriorate.
Domestic Supply and Demand
Total projected supply, demand, and exports are unchanged from the previous month at 3,294, 1,176, and 1,300 million bushels, respectively. Nevertheless, there were some supply/demand changes within specific wheat classes.
| Wheat Class | Projected Supply | Projected Demand | Notable Changes |
| Hard Red Winter | 1,404M | 1,091M | Increase in exports of 10M bushels which was offset by a reduction in domestic food use. There was a 15M bushel increase in exports last month. |
| Hard Red Spring | 838M | 628M | After an increase in exports of 15M bushels last month we have a 20M bushel decline in exports while domestic food use increases by 10M bushels. Ending supplies increase by 10M bushels. |
| Soft Red Winter | 504M | 332M | Unchanged. |
| White | 364M | 291M | For the second month in a row we see an increase in exports of 10M bushels. Ending stocks decline by 10M bushels. |
| Durum | 182M | 134M | Unchanged |
Winter Wheat Crop Conditions
Wheat crop conditions have continued to deteriorate month to month. While the same percentage of the Kansas wheat crop rated good to excellent as last month, the percentage of the wheat crop rated poor to very poor has increased to 37% from 33% a month earlier. The Nebraska wheat crop condition is essentially unchanged, with 41% of the current crop rated good to excellent compared to 42% and 15% of the crop rated poor to very poor from 14% a month ago.
On the southern plains crop conditions are much worse than a month ago. In Oklahoma, the percentage of the crop rated good to excellent has declined from 37% a month ago to only 21%. 40% of the Oklahoma wheat crop rated poor to very poor compared to only 19% a month ago. In Texas the percentage of the crop rated good to excellent is more or less unchanged but the percentage of the crop rated poor to very poor increased by 6% to 51% compared to 25% a year ago.
If the current wheat crop quality continues to deteriorate, we may see continued rising prices in spite of the unchanged supply.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I have a February bull and bear credit spreads in MOS, whose movement is in part correlated with wheat prices.
