The KC September wheat contact broke the $6.36 support price. The new KC September wheat contract’s target price is about $6. To break the wheat price downtrend, the KC September wheat contract price needs to close above $6.60.

With the KC September contract price below $6.36, the odds of $7 cash wheat are about 30 percent. If the KC September wheat contract price breaks $6, the odds will decline to about 15 percent. KC September wheat contact prices above $6.36 would indicate that the odds of $7 cash wheat would be about 35 percent.

These predictions are based on tight hard red winter (HRW) wheat stocks that will remain relatively tight until the 2015 HRW wheat harvest. U.S. HRW wheat ending stocks for the 2013/14 marketing year (June through May) were 235 million bushels compared to a five-year average of 333 million bushels. Ending stocks on May 31, 2015, are projected to be 185 million bushels.

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The remainder of the wheat supply and demand situation is mostly negative for HRW wheat prices. While U.S. HRW wheat ending stocks are projected to decline 50 million bushels, U.S. wheat ending stocks are projected to increase 70 million bushels from 590 million bushels in the 2013/14 wheat marketing year to 660 million bushels for the 2014/15 wheat marketing year.

Of the 50-million bushel projected decline in HRW wheat ending stocks, 22 million bushels may be offset by the projected increase in hard red spring wheat 2014/15 stocks.  Soft red winter wheat’s 84 million bushel projected increase in ending stocks may also be used to offset the decline in HRW wheat stocks.

Lower HRW wheat stocks could also be offset by a 27 percent (119 million bushels) decline in projected U.S. exports. Argentina, Australia, Canada, Russia, and the Ukraine (all competing exporters for HRW wheat) are projected to export a higher percentage of the world’s wheat exports than during the 2013/14 wheat marketing year.

The final nail in HRW wheat’s price coffin may be world wheat stocks.  World wheat ending stocks are projected to increase from 6.77 billion bushels to 6.96 billion bushels. The five-year average is 7.04 billion bushels. More than an adequate amount of wheat is available to meet 2014/15 marketing year world wheat demand.

The 2014/15 world wheat harvest is about 60 percent complete. Major countries that have yet to start harvest are Argentina, Australia, and Brazil. Canada, China, the EU, Russia and the U.S. spring wheat crops are also un-harvested. Much of the 2014/15 wheat marketing year’s un-harvested wheat production has the potential to affect HRW wheat prices.

The positive HRW wheat price news is that HRW wheat stocks are tight, and most of the negative news reported above is already factored into the current price. New market news will determine if the HRW wheat price goes up or down from current price levels. And un-harvested production will be the major determining price factor.

In four out of the last six years, the July monthly average wheat price was less than the average June price. Each of these years prices declined into the November/December time period. In two of the four years, prices did increase in August before declining below the June/July prices.

Between now and December 1, the odds of $7 wheat are about 30 percent. The question for producers who have wheat in storage is: “Which will hurt worse, not selling for $6 and having to sell at $5.40 or selling at $6 and not having the opportunity to sell at $6.60?”