The Kansas City Board of Trade December wheat futures contract price is trading in a price range between about $6.87 and $7.77. The contract price entered this range on Aug. 2. The bottom price of the range has been tested three times and the top price four times.

Cash prices are also in a 90-cent sideways pattern. Because the basis has improved about 30 cents, the cash price sideways pattern has shifted up about 30 cents.

At this writing, Oklahoma and Texas Panhandle cash price bids are between $5.81 (-$1.35 basis) and $6.28 (-$0.88 basis). Depending on location, these cash prices are in the middle of the sideways price pattern. The top of the cash price range would be the current price ($5.81 or $6.28) plus 45 cents ($6.26 or $6.73). The bottom of the price range would be the current price minus 45 cents ($5.36 or $5.83).

Nothing indicates that wheat prices will break out of the sideways pattern. However, if Argentina or Australia’s wheat production is significantly higher or lower than expected, the trend would change.

In the October USDA/WASDE Wheat Supply and Demand Estimates, Argentina’s 2010/11 marketing year wheat production is projected to be 441 million bushels compared to a 5-year average of 487 million bushels. Australia’s wheat production is projected to be 845 million bushels compared to a five-year average of 671 million bushels.

Some market analysts speculated that China’s recent interest rate increase of 0.25 percent was partially a market strategy. The theory goes, and the market reaction was, that the increased interest would cause the value of the dollar to increase and grain prices to decline. When this did happen, China took advantage of lower prices and bought soybeans.

Now the rumor is, that to meet corn needs, China will import more corn during 2010/11 than at any time during the last 15 years. China may also import feed quality wheat to offset part of the corn needs.

If China does import feed wheat, wheat prices may increase. This situation could also provide a market for low protein wheat that has been taking up scarce storage space in Texas and Oklahoma.

Abnormally dry and drought conditions remain in the Texas Panhandle, western and central Oklahoma, western Kansas, and up through Colorado. The Mississippi Valley region is also dry. As wheat stocks slowly decline, the market will become more aware of winter wheat planted acres and the conditions of the 2011 U.S. winter wheat crop.

Corn will continue to be the major influence relative to grain prices. Some market analysts predict that to meet 2011/12 marketing year corn demand, corn planted acres must increase from about 88 million to 90 plus million acres. Increased corn acres would be taken from soybeans, cotton, and wheat.

The soybean supply is adequate. The soybean market may have to protect soybean planted acres and to do this, soybean prices will increase in response to higher corn prices.

Wheat supplies are more than adequate. United States 2010/11 marketing year wheat ending stocks are projected to be about 300 million bushels above the five-year average. However, average wheat stocks are within striking distance.

A below average 2011 winter wheat crop could result is average or less stocks. Wheat prices will react to corn prices due to the need to protect planted acres (spring wheat), and because wheat may be substituted for corn in livestock feed rations.

The bottom line is that currently the market has a 45-cent downside price risk and a 45-cent upside price opportunity. Commercial storage and interest costs are about 7 cents per bushel per month. If you can’t afford to take the risk, sell some wheat.