At this writing, Oklahoma cash wheat prices range from about $3.90 to $4.05. Texas cash wheat prices range from about $4 to $4.30. The Kansas City Board of Trade (KCBT) March wheat contract price is $4.90 and the July wheat contract price is $5.14.

Since USDA's Jan. 12 grain supply and demand reports and the winter wheat seedings report, cash wheat prices have declined about 76 cents. About 73 cents of the cash price decline was due to lower KCBT March contract prices and about three cents was due to a decline in the basis.

A big loser in the decline of grain prices was the index and hedge funds. Reports indicated that the funds were big buyers of grain futures contracts before Jan. 12. One market analyst's firm estimated fund losses at 1.1 billion dollars.

The major reason prices declined was because the market finally faced the fact that there is excess wheat in the U.S. and in the world. Many market analysts had been making this point for several months.

One signal that wheat stocks were above USDA's estimate was the lack of export sales. In the January USDA wheat supply and demand report, U.S. wheat exports were lowered to 825 million bushels from 875 million. Exports are now projected to be about 19 percent less than last year.

Currently, wheat exports sales are 21 percent less than at the same time last year. Hard red winter wheat export sales are 34 percent less than at the same time last year, compared to USDA's marketing-year projection of a 27 percent decline.

Between now and July, market factor changes that could result in higher prices are increased export demand, below average U.S. winter wheat production, problems with corn plantings and poor corn growing conditions and below average expected foreign wheat production.

The 76-cent wheat price decline has made U.S. wheat more competitive in the export markets. There is still a glut of wheat available in the Black Sea area and all major importing countries are projected to have higher ending wheat stocks than last year. Do not expect exports to result in higher prices.

The USDA estimated a 14 percent decline in winter wheat planted acres. Hard red winter wheat planted acres are expected to be down 12 percent. Soft red winter wheat acres are expected to be 29 percent lower.

Some market analysts projected higher spring wheat planted acres. Using average yields and percentage harvested acres, 2010 U.S. wheat production is projected to be 2.0 billion bushels. With 100 million bushels of wheat imports, the total 2010-2011 marketing year U.S. wheat supply would be 2.1 billion bushels.

United States 2010-2011 wheat use (domestic and export), is projected to be 2.1 billion. This implies that with average yields, wheat stocks will not decline in the 2010-2011 wheat marketing year and prices will remain low.

For wheat prices to go above $5.50, 2010 U.S. wheat production needs to be less than 1.8 billion bushels and/or world wheat production needs to be less than 22 billion bushels. This is not very likely.

Reduced 2010 corn production could have a positive impact on wheat prices. The problem is that corn planted acres are projected to be about 90 million compared to 86.2 million acres last year. Corn ending stocks are also projected to be almost 1.8 billion bushels. Do not expect much support from the corn market.

The next wheat crop to be harvested that will impact wheat prices is the Oklahoma and Texas wheat harvests. Losing these crops would only result in higher prices with little or no wheat to sell.

The best case scenario may be for record yields. With record yields, wheat prices may be in the $3.75 to $4 range. Forty-bushel per acre wheat at $3.75 ($150/ac) is better than 29 bushel wheat at $5 ($145/ac).