Man looking up at the eclipse with eclipse glasses

The Harvest & the Eclipse: In Review

An Update from VP of Operations Heath Harrison

In 2017, the Thresher Artisan Wheat harvest season was extended due to weather that had caused delays in spring planting. Despite the delays, our merchandising and field staff continued to work diligently to sample producer’s fields, check moisture levels and check proteins that allowed for Thresher to maximize bin space at each facility. At the same time, this minimized downtime for producers by forecasting which fields they could harvest next. Thresher employees and management believe that in safety “zero is possible,” and it was demonstrated with all the field work completed without any injuries throughout our service area.

Within Thresher’s service area, the Newdale plant handled 24 percent more bushels this year with the new facility and bagger systems in place and at full operation. Idaho Falls, Blackfoot, Moreland, Rockford and American Falls overcame regional storage shortages by moving grain and directing it to facilities that could accommodate, which allowed for all our producers to find a place for their grain. Last year, Thresher experimented with grain bagging and successfully bagged just under 400k bushels of wheat. This year the baggers enabled our crew to pack away just under 750k bushels. This helped the region create additional storage for grain that otherwise would have gone to waste due to the storage shortage created by the malt industry.]

Along with unexpected delays, the 2017 harvest season even battled an eclipse. The eclipse was expected to draw 350k to 500k people to Thresher’s service area in the form of tourists, vendors, and even NASA crews. It was feared that this anticipated influx of people would bring harvesting to a standstill. Thresher ensured producers that no delay decisions would be made until August 21, 2017, the day of the event. With producers wanting to continue harvesting, Thresher kept all facilities throughout the valley open for business. Thresher remained committed to customer service and serviced the region in a responsible manner, even pausing with “eclipse glasses” to enjoy the rare event.

Thresher values your opinion to continue to improve service to producers. Please share any feedback or thoughts on the 2017 harvest season with your local Thresher facility.

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Market Update Brought to You by the VP of Merchandising, Mark Hanson

In combination with the poor demand for high-protein wheat and the ongoing trend of bearish USDA reports, the wheat markets continue to struggle to gain any upward momentum. With a higher than expected stock report at the end of September, the USDA increased the carry-in stocks by 3 million bushels. The USDA also added to the bearish outlook with a feed use decrease of roughly 30 million bushels. Cheap corn values and more than ample supplies available have been the common theme to the feed wheat demand. While some exports have recently occurred, the overall stocks are more than adequate, which is holding the wheat futures on the lower end of the trading range. Currently, the U.S. ending stocks equates to a stock surplus of 166 days. In other words, if U.S. producers did not harvest another bushel this year, we would have enough to cover almost 6 months of usage. Worldwide, there is a surplus of 132 days. With roughly three seasonal harvest periods throughout the world each year, this surplus is more than adequate and keeps the supply risk very low for the end users.

The supply concerns for DNS and durum have subsided tremendously over the past couple of months. The board spreads significantly widening out between Kansas City wheat and Minneapolis wheat last summer have led to a major demand shift to the lower-protein segment. This has resulted to some basis appreciation to the mid-protein market and some basis deterioration to the DNS market. This trend will likely continue through the next few weeks, but it is unknown at this point whether it will continue throughout the year. The export demand for DNS has moved to Canada and the Black Sea Region due to strong U.S. DNS values. Strong values also limit interest domestically for DNS. With the bulk of the row crop harvest now taking place, limited wheat supplies are expected to move over the next few weeks. This could lead to some basis volatility but should not, given the ample supplies throughout the pipeline.

Seasonally, the wheat markets tend to be negative through January. Since much of the negative action has already taken place, an environment for major rallies will be difficult to achieve. Below are the 5-year, 15-year and 30-year trends on the March Chicago futures:

Technically, the Chicago continuous charts are trying to figure themselves out. Using the Sept. 16 low – July 17 high, the WZ held the 61 percent retracement. That the market held despite the negative data shows that more fuel is needed to break that level. The key is whether corn will hold its value over the next few weeks. If additional pressure takes place in corn, it is very possible WZ will look at testing the $4.00 mark again. Likewise, technically and fundamentally, breaking through the $4.50 resistance will be difficult unless there is help from a fundamental factor.

In general, wheat is caught in a continued bearish fundamental trend. As all bullish periods end at some point, so will this bearish period, but it continues to appear that it will take additional time for this to develop. Demand will be more focused on top-quality supplies with the current market pattern and ample stock, therefore the lower-quality supplies will be the most difficult to market for the foreseeable future.

Market Update by Mark Hanson, VP Merchandising

Market Update August 2, 2017

The market will decipher corn, beans and wheat production as July has come to a close and we continue into August. Analysts are becoming less enthused about the yield prospects for corn after much of the western belt experienced limited rain and warmer temperatures during the key pollination period. Ahead of the August crop report, FC Stone lowered their estimates to 162.8 bu/acre from the current USDA estimate of 170.7. With the USDA currently projecting a comfortable 16.2 percent stocks to use, the market has had limited ability to draw in support given that the potential lowering of yields could decrease the ending stocks by as much as 661 million bushels. This decline would cause the stocks-to-use ratio to reach a much more bullish level of 11.5 percent.

In considering wheat, it is important to understand the corn dynamics as much of the lower protein HRW and SWW wheat has competed against corn in the feed markets recently. If the corn tightens up, the feed wheat markets should begin to see more life after two tough years. With the strong dollar resulting in a poor export market, the domestic feed market has been the main outlet for much of the SWW and lower protein HRW in PNW region.

Mills have loaded up on the cheap SWW supplies with the HRW harvest across the southern plains; farmers in that region are estimated to be selling 70 to 75 percent. This is a large percentage sold relative to this time of year. The DNS market led the drive upward due to the drought that hit much of the northern plains. Production is estimated to be half of last year as the market rallied over $2/bushel. Given the DNS/HRW spread that is currently $2.50/bu, many mixes are switching to cheaper HRW wheat. That coupled with a flush of old crop supplies that hit the market during the rally has oversaturated the DNS market. While the production issues are still a concern and likely will have longer-term effects to the markets, the short term appears bleak at this time.

Given current supplies, mills and feed sectors will continue to keep themselves full at lower price levels. The pipeline is expected to tighten slightly, which could yield a potential upside later in the crop year. It is currently uncertain if this could happen in 2017 or in the first or second quarter of 2018, but it appears there may be some additional excitement in store for wheat. While this is supportive, the balance sheets for wheat still show comfortable stocks and the upside may be a bit more tempered than past years, but at least it appears that we finally may have seen the end of two years of a bear market.

Seasonally, KC wheat tends to gain on Minneapolis as we get into August. Below is a chart showing that seasonal trend:

August wheat market graph

While the wheat charts are still evolving, we may be reaching a near-term bottom. So much can happen, but looking at seasonal trends, we suspect we will remain rangebound until we get through harvest.