Cash wheat prices have declined from $8 in late January to about $6.80 at this writing (note about 15 cents above when I replied to the email). Since last January, the KC Red Wheat September wheat contract price has declined from $8.72 to $6.91. The cash price declined about $1.40, while futures prices declined $1.81. The KC September basis increased 41 cents.
Hindsight is nearly always 20/20. If prices could have been know with certainty, Oklahoma and Texas Panhandle wheat would have been sold on July 20, 2012 for about $9 per bushel. Wheat prices had increased from $6 on June 1 to $9 on July 20, 2012.
A problem for hard red winter (HRW) wheat is that it has not had and does not have enough moisture. Yet, some HRW wheat may have received moisture too late. Winter wheat that is just now germinating has a low yield potential
At this writing, the Kansas City Board of Trade March contract price is $8.00, and the July contract price is $8.20. Cash prices in Oklahoma and Texas are around $7.60. Wheat may be forward contracted for about 55 cents less than the KCBT July wheat contract price. The Oklahoma/Texas Panhandle average annual price is about $6.40.
The drought in the hard red winter (HRW) wheat area may have producers “boxed into a corner.” Some producers think that they want one of two outcomes. The preferred outcome is favorable weather, high wheat yields, and a good price. The alternate outcome may be zero or nearly zero production and then collecting crop revenue insurance. In economist language, these are called “corner” or “extreme” solutions.
The Kansas City Board of Trade (KCBT) December wheat contract price is about 43 cents higher than the KCBT March contract price. This implies that Kansas City wheat prices are expected to increase 43 cents between now and December.
Since prices broke out of the five-month sideways pattern on December 1l, KCBT March wheat contract prices have declined about 80 cents. At this writing, the Kansas City Board of Trade March contract price is $8.15. The KCBT March contract price has support at about $8 and resistance at about $8.50.