Milling & Baking News - November 21, 2017 - 27

Grain Market Roundtable

get out of those short positions."
No. 1 hard red winter basis, Kansas City, 13%
The "third school" looks to the outcents per bu
side markets, Mr. Freed observed.
500
"We have to watch the dollar, the
400
money flow in and out of the energy
300
markets, what the stock market is doing, things like that," he said, pointing
200
out commodity markets recently were
100
strengthened by China's announcement
0
it may invest heavily on infrastructure in
the next few years.
-100
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Chicago and Kansas City wheat futures trading near contract lows were only
about 15c higher than a year ago. In con- 12.6%-protein hard red winter wheat (at 32.7 million acres planted for harvest this
trast, Minneapolis spring wheat futures $2.35 a bu on Nov. 14) may decline and year. The 2017 planted area, in turn, was
were trading about $2 a bu above a year average $2 a bu in January-March 2018 the smallest since 1909.
"However, because there was a fair
ago. Spring wheat futures traded side- and perhaps average $1.60 in April-June.
"People look at futures and say wheat amount of abandonment because of
ways through October, made a breakout
above recent moving averages in early prices are pretty low," Mr. Meyers said. drought in 2017 in some areas, I actually
November before trending lower again in "That's what people concentrate on. But have harvested area for winter wheat in
then they look at flour prices and say, 2018 up 4% from 2017," Mr. Meyers said.
subsequent trading.
His forecast for winter wheat harvested
The wide spread between Minneapo- 'Wow, where did that come from?'"
In the case of pan bread flour, the area in 2018 was 26.4 million acres versus
lis futures and the winter wheat futures
(around $2 a bu) reflected strong U.S. and high prices reflect the historically strong 25.3 million acres in 2017.
"Applying trend yields, I have winter
world demand for high-protein wheat cash hard winter wheat basis, and in the
with supplies tightening in the United case of spring flour grades, Minneapolis wheat production for 2018 at just less than
States and Canada because of smaller spring wheat futures $2 a bu higher than 1.3 billion bus, which would be up about
2017 spring wheat crops in those two a year ago was the culprit. Only in the 2% from 2017 but still down 23% from the
countries. Spring wheat also was in de- case of soft flour pricing did low wheat 2016 crop," Mr. Meyers said.
Mr. Meyers said he expected
mand for blending because
hard red winter wheat acres
U.S. producers have harvestNearby wheat futures prices
to decline about 2% from last
ed two low-protein hard red
per bu
$8.80
year. His projection was for
winter wheat crops in a row.
Minneapolis
23 million acres to be planted
While Kansas City wheat
to hard red winter wheat comfutures hovered near contract
$7.20
pared with 23.4 million acres
lows, the cash basis on hard
for 2017. Some analysts sugred winter wheat has soared
$5.60
gested there would be an even
to the highest levels since
Kansas City
greater decrease in hard winter
2008. Mr. Freed said hard red
Chicago
wheat planted area.
winter wheat growers sold
$4.00
March
April
May
June
July
Aug.
"I don't think it will be
nearly all of their 2017 crop
2017
down as much as other people
at harvest, and with Kansas
may be thinking," Mr. MeyCity wheat futures so low, it
was the cash basis that had the principal futures make possible lower flour pricing ers explained. "In 2017, acres dropped
more than 3 million from the year bethan a year ago.
burden in originating wheat.
At this time of year, with the 2018 win- fore and were down almost 6 million
"What happened was we've had two
years in a row of hard red winter wheat ter wheat crop planted and beginning fall acres from 2015. We've had a substanwith low protein and just not good qual- growth, the market begins to trade its ini- tial decline in winter wheat acres in the
ity," Mr. Meyers said. "Demand for tial ideas on the outlook for the next crop last two to three years. And historically,
when we've seen that, planted area
protein and better quality is what has year.
The U.S.D.A. won't issue its estimate of tends to plateau for year or two for crop
driven the basis to extremely high levels.
It's different from 2008, when the basis how much winter wheat has been planted rotation and other reasons."
Unlike Mr. Freed, Mr. Meyers said he
was driven higher by significantly lower for harvest next year until January. But the
expects soft red winter wheat planted
market was beginning to trade its ideas.
stocks."
Mr. Freed indicated he thought soft area for 2018 to be about 5% smaller than
Mr. Meyers pointed out the U.S.D.A.
forecast the 2018 hard red winter wheat red winter wheat acres may be up about in 2017 because soft red winter wheat
carryover at 461 million bus. In 2008, the 5% to 10% this year amid favorable con- growers have more choices on what to
carryover was only 138 million bus. With ditions. He said he expected hard red plant than do farmers across much of the
the exception of 2008, Mr. Meyers said winter wheat plantings to be a bit lower hard winter wheat belt.
Mr. Meyers said growers may plant
he could find no other year in the past 25 than last year. He also said spring wheat
when the cash hard red winter wheat ba- plantings were likely to increase in 2018 another 1 million acres to spring wheat
because of relatively high spring wheat for harvest in 2018 because of relatively
sis was as high as it is today.
strong spring wheat prices.
Mr. Meyers said he expects the cash prices and last year's small crop.
All-wheat acres may be up about
Mr. Meyers said he expected about 31.9
hard winter wheat basis to weaken but
remain historically strong for the rest million acres to be planted to winter wheat 600,000 acres from 2017, and because
of 2017-18. He suggested the basis on for harvest in 2018, down about 2% from harvested areas should be larger in
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Milling & Baking News - November 21, 2017

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