April 2016: The Flour Report

Bias

Weakness in both winter and spring wheat basis levels should only continue, as there is little compunction to sell grain today
– as most elevators are full and are not active buyers again until June or even July. If weather remains favorable, Hard Red Spring wheat will get planted early, which historically has led to higher yielding and a better quality crop.
The most recent rain and snow were extremely beneficial and timely for HRW and SRW in the ground. Despite lower winter wheat acreage planted, forecasters are expecting another bumper crop. Taking into consideration that carry out stocks in the U.S. were raised to their highest levels since 1987 and are equal now to total domestic demand annually, means we will be swimming in wheat come July 1st. Futures markets reflect full carry, which will encourage elevators to store as much wheat unless forced to make room for fall crops which should also keep basis levels soft for the foreseeable future.
The fly in the ointment in getting closer to $4.00/bu wheat in KC come July 1st will be corn and beans. Currently South America is having challenges getting their harvest in the bin – the worst in 13 years -which has spooked prices for both commodities in Chicago. If ideal conditions persist domestically, patience should premiate flour buyers, as our bias is for weaker values despite the possibility of increased global demand for the “other” crops. Stay tuned.