Market Perspective

Wheat markets have been trying to find a bottom the last week. Recent support has come from concerns about the quality of the European wheat crop due to excessive rains. As much as a third of the French crop may wind up becoming feed wheat. They are having the same falling number issues that many of us experienced last year.

During the downtrend in wheat futures over the last three months, speculative commodity funds have accumulated a net short position of over 400 million bu. If the concerns over the quality of wheat in Europe continue this may spark a shortcovering rally in Chicago. The unrest in the Ukraine and the potential for El Nino affecting Australia and Asia remain in the background for now.

Potential record U.S. corn and soybean crops continue to weigh on grain prices in general. July turned out to be near perfect weather for the row crops with recent crop ratings for both corn and soybeans at over 70 percent good to excellent. The latest estimates for U.S. corn production is around 14.4 billion bu with carryovers expected to be over 2 billion bu. Soybean production is estimated to be 3.8 billion bu with carryovers to be over 400 million bu. The next USDA Crop Production Report will be out next Tuesday, August 12.

Locally, harvest is winding down. In general the yields have been below average due to the drought. Protein levels are running one-half to one percent higher than last year. Test weights have actually been pretty good with over 95 percent above 60 lbs. and falling numbers have not been an issue so far this year.

At current prices for Soft White and with below average yields many producers and landlords may qualify for a payment under the Crop Revenue Coverage Insurance Program. The harvest price is calculated now through the month of August. You can track the daily prices and the final harvest price by going to the following website: http://www3.rma. usda.gov/apps/pricediscoveryweb/DailyPrices.aspx

My opinion of the wheat market, and especially the white wheat market, has not changed since the last time. The overall wheat market has been beaten up and the speculative funds are way short. The problems in Europe point out that the wheat market can rally given positive news. El Nino and the Ukraine can still have an impact on prices. White wheat sales continue to be steady and the white wheat crop is not getting bigger. Add to that, next year's crop prospects do not look good at this point unless we get some much needed rain. (Not until after harvest, I hope.) The fundamentals for white wheat are decent and I would like to see where markets and prices are at, come October.

Pearson Burke watches the grain markets for the Odessa Union Warehouse.