Two weeks before this article was written, wheat prices were predicted to increase 50 cents between early June and mid-November. During the last two weeks, the basis increased 20 cents and the Kansas City Board of Trade 35 cents. Cash prices increased about 55 cents.

Before the 55-cent price increase, market recommendations were to store wheat. Storage and interest costs between now and mid November were, and still are, about 30 cents. The 55-cent price increase, plus not having to pay the 30 cents storage and interest (carry) costs, are equal to an 85- cent price increase.

The storage decision is now more difficult. The 30 cents carry is still 30 cents. Prices must increase another 30 cents between now and Dec. 1 – a total of $1.10 from two weeks ago – to break even with selling wheat now.

Relatively low protein wheat is part of the reason that wheat basis declined to a minus $1.67 in some Oklahoma and Texas elevators. The basis in these elevators has already recovered about 20 cents and is expected to increase another 20 cents before Dec. 1.

If the basis increases 20 cents, a 10-cent increase in the KCBT December futures contract price is required to cover storage and interest costs.

Wheat protein levels improved as the wheat harvest moved into central and northern Oklahoma. The basis in these areas has remained between a minus $1.18 and a minus $1.05. Most northern Oklahoma elevators’ basis are currently near $1.10. These basis are expected to increase 10 to 20 cents between now and Dec. 1.

The Texas and Oklahoma Panhandle wheat elevator basis are near a minus $1.30. If wheat protein in these areas averages above 11.5 percent, this basis will increase to about a minus $1.10 relatively quickly and probably to a minus $0.90 by Dec. 1. If the protein averages below 11.5 percent, the basis should remain in the minus $1.30 range, in the short term, and increase to a minus $1.10 by Dec. 1.

A weak basis increases the odds that storing wheat will be profitable. If the basis increased during the last two weeks of June, part of the expected basis increase has already occurred.

Changes in the KCBT December wheat contract price will depend on world wheat production and U.S. corn production.

Due to weather, world wheat production may be 300 million bushels lower than previously predicted. Planting conditions in western Australia and western Canada were too wet. Significantly less wheat was planted than expected. Each country is expected to produce at least 100 million bushels less than what was predicted in early June.

Planting, growing and harvest problems in Argentina and China also resulted in a reduction in production expectations.

During the week prior to this writing, the Kansas City Board of Trade July wheat contract price increased 36 cents ($4.54 to $4.94). The July contract price blew right through the $4.80 price resistance level and challenged the $5 resistance. The Chinese, Canadian, Argentine and Australian weather problems have been factored into the market price.

Unless we get too excited, reducing the world’s wheat supply by 300 million bushels may be insignificant. World 2010-2011 wheat production and beginning stocks are projected to be 31.2 billion bushels. A 300-million bushel decrease is less than a 1 percent decrease in supply.

At this writing, the U.S. corn crop is in excellent condition. Some forecasts are for hot and dry weather.

Congress is expected to increase the ethanol level in gasoline. This would result in increased corn demand for ethanol production, lower corn stocks, and higher corn and wheat prices.

Recent wheat price increases lower the odds that storing wheat until the September through December time period will be profitable. However, current market conditions indicate that there is about a 70 percent chance that storing wheat is a good gamble.