In the October wheat supply and demand estimates, the USDA lowered the wheat ending stocks estimate to 530 million bushels and increased the predicted average annual price range from $3.20 to $3.60. The mid-point predicted price is $3.40.

The domestic 2003/04 marketing-year, wheat-ending stocks were 546 million bushels and the 2004/05 marketing year ending stocks were 540 million bushels. The average annual price for both years was $3.40.

Oklahoma and Texas' average annual price tends to be about 10 cents lower than the average U.S. price. This marketing year (June 1 through Sept. 30), Oklahoma/Texas panhandle wheat prices have averaged about $3.21 compared to the U.S. average price of $3.25.

Compared to past year's wheat class price relationships, hard red winter wheat prices have been relatively strong. The average wheat price estimate for the first half of September was $3.38 for the U.S, and $3.43 for Oklahoma and the Texas panhandle.

The higher U.S. wheat cash price projection is the result of lower than expected U.S. and foreign (world) wheat production and higher exports. The U.S. wheat production estimate was lowered 69 million bushels and the export projection was increased 25 million bushels.

Foreign wheat production estimates were lowered 15 million bushels. Production estimates were lowered for the EU-25, Argentina and Kazakhstan. Production estimates were increased for Canada, Morocco, Australia and Romania.

Since late September, Oklahoma and Texas wheat prices have increased about 10 cents. During the same period, the Kansas City Board of Trade (KCBT) December wheat contract price and the Texas gulf cash price has increased 20 cents. Increased barge, truck and rail shipping cost may explain why the KCBT December futures contract price and the Texas gulf price increased 10 cents more than the central Oklahoma and Texas panhandle price.

To determine if wheat prices will continue the uptrend, compare current prices and basis with the following benchmarks. At this writing, the KCBT December contract price is $3.86, the Texas gulf basis is 75 cents and the local basis is about a minus 30 cents.

If the KCBT December contract price is above $4, then the futures contract price uptrend will continue and cash price will follow. If the December contract price is between $3.85 and $4, wheat prices will have established a sideways pattern and the cash price trend will be uncertain. A December contract price below $3.85 will indicate that the uptrend has been broken and that prices may decline. The KCBT December target price would be $3.65.

A Texas gulf basis above 75 cents will indicate that export demand continues to support wheat prices, and a gulf basis below 75 cents will indicate that export demand is declining.

Low corn prices will limit wheat price grains. The USDA increased the corn production estimate to 10.9 billion bushels (second largest on record), corn ending stocks to 2.2 billion bushels and the 2005/06 marketing year corn price is projected to be $1.85.

Major factors that will determine the wheat price trend are Argentina and Australia's wheat production and the development of the 2006 U.S. winter what crop. Argentina is projected to produce 430 million bushels compared to 588 million bushels last year and a five year average of 544 million bushels. Australia is projected to produce 808 million bushels compared to 780 last year.

If you have not sold any 2005 harvested wheat, it is time to start moving it into the market. Consider selling one-third of it now and the remainder during the November/December time period.

The KCBT July 2006 wheat contract price is $3.81. This implies that the market is offering $3.40 for 2006 harvested wheat.

Given high fuel and fertilizer costs worldwide, producers will have a tendency to apply less fertilizer and not plant marginal acres. This could lead to lower production and higher prices 2006.