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.
On December 12, wheat prices broke out the bottom side of a five-month sideways trading pattern. Using KCBT March Wheat contract prices, the price spread from the top ($9.62 on Aug. 10, Sept. 14, and Nov 9.) to the bottom ($8.80) was 82 cents. At this writing, wheat prices are $1.47 below the $9.62 top and 64 cents from the bottom price.
In mid-June 2012, Oklahoma and Texas cash wheat prices were near $6 per bushel. The wheat harvest was running about two weeks ahead of average. The USDA was projecting that wheat ending stock would decline from 728 million bushels for the 2011/12 marketing year to 694 million bushels for the 2012/13 marketing year. World wheat ending stocks were projected to be 6.91 billion bushels compared to 7.2 billion bushel the year before
At this writing, the cash wheat price in Perryton, Texas, is $8.25 and the price in Medford, Oklahoma, is $8.28. Wheat may be forward contracted for harvest delivery for $8.40 (-55 cents KCBT July 20113 contract) at the Perryton and Medford elevators. Some producers are worried about protecting these relatively high prices.
Kansas City Board of Trade (KCBT) December wheat contract prices have been trading in a sideways price pattern between $8.69 and $9.57 since July 13 (Friday the 13th). Chicago Board of Trade (CBT) December corn contract prices have been in a sideways price pattern between $7.33 and $7.76 since September 28. Few market signals are indicating that wheat or corn futures prices will break out of the sideways patterns in the near future.