Kim Anderson

Oklahoma State University
Wheat producers between a rock and a hard place
The question is, do you accept the current low price (rock) or risk lower prices to take a chance on higher prices (hard place)?
Wheat producers expecting higher returns in 2016 than 2015
The Oklahoma wheat tour estimated 2016 Oklahoma wheat production to be 129 million bushels.
Two connected stories: The KC July wheat contract price and the basis
When wheat prices got low, the basis became the most important story.
Yield and quality more important than price
At this writing, the KC July wheat contract price is $4.77. For harvest-delivered wheat, Oklahoma elevators are offering between minus 75 cents and minus 50 cents basis.
Either you’re a wheat farmer…or you’re not
After the recent freeze, a relatively large wheat producer posted that they had lost five out of the last six wheat crops. “It’s like two farmers were talking. One says, ‘If it doesn’t rain, I’ll need to rob a bank.’ The other replies, ‘If it doesn’t rain, I will have robbed a bank.’”
Wheat prices: A slow grind down, but a bottom may be near
The wheat market appears to be in a “Catch-22.” There are few reasons for prices to go lower. There may be fewer market reasons for prices to go higher
The prognosis for wheat prices: not so good
Elevators are offering from minus 60 cents to minus 46 cents basis the KC July 2016 wheat contract price for 2016 harvest-delivered wheat.
For wheat: A bad news and good news scenario
For wheat prices to go above the cost of production, world wheat production must decline.
Hard red winter wheat production in 2016 expected to be less than 2015
The January 2016 report indicated that January 2016 wheat growing conditions are better than growing conditions in January 2015.
Wheat markets have changed; profit principles haven’t
Still, the U.S. wheat industry is, and will remain, a major player in the world market.
Few reasons for wheat prices to move higher
The good news is that nearly every wheat supply and demand (market) factor is negative for prices. Prices have little reason to continue the downtrend.
Factors to use in wheat production/pricing decisions
Forward contract prices are below total operating costs and nowhere near total costs.
KC wheat contract price above $6.00?
Can KC wheat contract prices reach $6.00 by April or May? Yes. But it would take a big change (loss) in 2016 world production expectations, and probably a lower dollar index.
If wheat prices can hold out until January 15, 2016…
Wheat prices just do not have much potential to change very much until after January 15, 2016.
$4 wheat: Will it be $3.30 wheat?
U.S. agriculture pays a price to have a relatively strong economy. Since June 2014, the index of the U.S. dollar against major currencies has increased from 80.4 to 100.7.
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