At this writing, wheat may be forward contracted for harvest delivery for about $4.07. The five-year average June Oklahoma and Texas panhandle price is $3.01 and the 10-year average price is $3.09. The above average price being offered for harvest delivered wheat is the result of relatively low 2006 hard red winter wheat production expectations.

Elevator managers and wheat producers report that if at least one-half inch of rain is not received by March 20, the wheat crop can be written off in Southern Oklahoma and parts of the Texas Panhandle. North central Oklahoma's yields have been reduced and each day without rain continues to reduce the yield potential.

Green bugs are being reported over most of Oklahoma and parts of Texas. Producers appear to be waiting for rain to spray. Entomologists report that if producers spray there is still a chance for a wheat crop. If the infested wheat is not sprayed, the chances for a crop decline.

An elevator manager said that spraying was equal to a 0.5 to 1 inch rain. Wheat fields were significantly greener after being sprayed. Drought conditions magnify the damage caused by green bugs.

Elevator managers were asked the odds of an average or better crop. In extreme southern and southwestern Oklahoma, the managers said that there was a 10 percent to 15 percent chance. They also said that if it did not rain 1 inch by March 20, there would not be much of a wheat crop.

As you go north, wheat conditions improve. The odds of an average crop along I-40 in East Central Oklahoma were 35 percent and it would take a 1.5-inch rain by March 20 to produce an average crop.

The odds of an average crop in western Oklahoma and western Kansas were about 20 percent. One manager compared 2006 with the 2002 wheat crop, which was about 35 percent of normal. He added that a good 1- to 2-inch rain still had the chance to change things.

In North Central Oklahoma, the odds of an average crop or better were estimated to be 40 percent. Odds to improve one moves into South Central Kansas.

All reports indicate that while potential yields have been reduced, an average or better wheat crop could be produced nearly everywhere except Southern and Southwestern Oklahoma and parts of the Texas Panhandle. If timely rains are received in North Central Oklahoma and South Central Kansas, above average wheat production is possible.

Exports are a negative price factor. To meet USDA's 1 billion bushel export estimate, weekly export shipments must average 20.9 million bushels. The three weeks prior to Feb. 23, weekly exports averaged 16.6 million bushels. If export demand does not increase, 2005/'06 marketing year exports will not reach 1 billion bushels and wheat-ending stock will increase.

The potential for below average 2006 wheat production and reduced wheat stocks during the 2006/'07 wheat-marketing year have resulted in above average prices. Adding to the price impact of lower U.S. wheat production is potentially lower world wheat production.

The International Grains Council lowered the 2006/'07 marketing wheat production estimate from 22.3 billion bushels to 21.6 billion bushels. World production less than 22 billion bushels could result in lower world wheat stocks.

The Kansas City Board of Trade July wheat contract has price support at $4.25 and price resistance at $4.50. It takes two consecutive closes below $4.25 to start a downtrend or two consecutive closes above $4.50 to continue the uptrend.

Volatile wheat prices will make setting minimum prices with put option contracts or by forward contracting and buying call option contracts expensive. About the best way to establish a harvest price is to use forward contracts.