I just looked at the markets and the Kansas City Board of Trade December wheat contract price was down 35 cents at $6.69. The KCBT July was $7.16, down 29 cents. Several producers have called wanting to know “After losing $2.83 in six weeks, how low will prices go?”

My best guess is that the KCBT December wheat contract price may have a bottom at about $6.75 and at the most the bottom is about $6. Six dollars is equivalent to a central Oklahoma and Texas Panhandle cash price of about $5.

Caveat: The KCBT December wheat contract has support and resistance lines at about $6.00, $6.75, $7.50 and $8.25. At this writing, the KCBT December wheat contract price closed at $6.68, below the $6.75 support price. If the current price (when you are reading this) is above $6.75, then prices have bottomed out. If the current price is below $6.75 and above $6, it is possible that the bottom has not been set. KCBT December prices below $6 will imply a bottom of $5.50.

Between now and the time you read this, the market situation may be significantly different. Several things will not change. United States wheat stocks will still be above average and world wheat stocks near average. The value of the dollar will still be higher than several months ago. Corn prices will still be relatively low.

Hopefully, the uncertainty about how the “government buyout” will be in place and the market will have had time to figure out what is going to happen. Maybe the general public and the stock market will have settled down. And the market will have a better estimate of the U.S. corn crop, and the Argentine and Australian wheat crop. This information should have a stabilizing impact on traders, investors and the general financial system.

Wheat prices were falling before the financial turmoil. United States 2008-2009 wheat marketing-year ending stocks are projected by USDA to be 574 million bushels compared to a five-year average of 490 million bushels. Hard red winter (HRW) wheat ending stocks are projected to be 243 million bushels compared to a five-year average of 191. Total wheat stocks are projected to be 17 percent above average and HRW wheat ending stocks 27 percent above average.

The value of the U.S. dollar as measured by the ICE December U.S. Dollar Index has increased from 72.5, on July 14, to 80.6, an 8.1 point increase or an 11 percent increase.

As the value of the dollar increases, the relative cost (price) of U.S. wheat to foreign buyers increases. Increased cost increases the probability that U.S. wheat exports will fall below projections and increases the probability that ending stocks will be higher than projected.

The Chicago Board of Trade December corn futures contract price declined from $7.96 on June 27 to $4.54. This is a $3.43 or a 43 percent price decline. KCBT December wheat contract prices have declined from $10.22 to $6.68 or about 35 percent.

Australia will start their wheat harvest in late October and Argentina’s wheat harvest will begin in November. Australia’s wheat production is projected by the USDA to be 22 million metric ton (mmt) or 808 million bushels. The USDA may lower this projection in the October Supply and Demand Report. Several analysts project Australia’s production to be closer to 21 mmt or 771 million bushels. Australia’s five-year average production is about 18.7 mmt or 688 million bushels.

Argentina’s wheat production is projected to be 12.5 mmt or 459 million bushels, compared to a five-year average of 14.8 mmt or 545 million bushels.

The market is sending wheat producers a signal that 2009-2010 marketing year wheat production should be less than 2008-2009 marketing year production. Wheat prices will continue to decline until producers reduce the number of planted acres and reduce production.