The expected June 2012 KCBT July wheat contract price is $7.25, and the expected Oklahoma cash price is $6.75. The expected Texas panhandle price is $6.60.

At this writing, the Kansas City Board of Trade (KCBT) July 2012 wheat contract price is $7.35. Wheat may be forward contracted in central Oklahoma for $6.85 (-$0.50 basis) and in the Texas panhandle for $6.60 (-$0.75 basis).

The KCBT July wheat contract price is $2.63 below the May 26, 2011 peak price of $9.98 and is $2.43 above the June 20, 2010 July contract price ($4.93). These two prices bracket the projected June 2012 KCBT wheat contract price.

The KCBT July 2011 wheat contract price on June 20, 2011 was $8.01. The central Oklahoma cash price was $7.78, and the Texas panhandle cash price was $7.61.

Given current U.S. and world wheat ending stocks projections and the drought-plagued hard red winter (HRW) wheat area, the odds are relatively small that in June 2012, the KCBT will be below $5.50. Given the above average world wheat stocks situation, the odds of KCBT wheat prices above $9 are also relatively small.

May 31, 2012, U.S. wheat ending stocks (761 million bushels) are less than both the May 31, 2011, wheat ending stocks (861 million bushels) and the May 31, 2010, wheat ending stocks (976 million bushels). The 2011/12 wheat marketing year (May 31, 2012) ending stocks are projected to be above the five-year average of 712 million bushels.

On May 31, 2010, world wheat ending stocks were 7.34 billion bushels. On May 31, 2011, world wheat ending stocks were 7.1 billion bushels. May 31, 2012, world wheat ending stocks are projected to be 7.15 billion bushels, which is below 2009/10 stocks and above 2010/11 stocks.

Both U.S. and world wheat ending stocks are projected to be above the five-year average. The five-year average U.S. wheat cash price is $6.34, which is equivalent to a KCBT contract price of about $7.

Relatively tight wheat protein supplies are expected to support hard red winter wheat prices. Hard spring wheat (high protein wheat) ending stocks are projected to be 143 million bushels compared to 185 million bushels last year and 234 million bushels in 2009/10.

Hard red winter wheat (moderately high protein wheat) ending stocks are projected to be 272 million bushels compared to 386 million bushels last year.

Relatively tight milling quality bread wheat may be partially offset by Argentina’s and Australia’s wheat production. Argentina is projected to produce 496 million bushels compared to a five-year average of 508 million bushels.

Australia is projected to produce 918 million bushels compared to the five-year average of 731 million bushels. If Argentina’s and Australia’s wheat crops are larger than expected, the availability of milling quality bread wheat supply will not be tight on the world market, and U.S. hard red winter wheat exports may be less than expected.

While wheat prices are uncertain, there is more uncertainty about 2012 wheat production. Producers who purchased crop insurance essentially have a guaranteed price of $6.03 (assuming the 70 percent insured level) for each bushel not produced below the average historical yield. This figure was calculated by multiplying 70 percent times the guaranteed price of $8.62.

Unless it rains, many Texas and Oklahoma farmers will not have wheat to sell in June 2012. However, wheat prices will influence wheat plantings in other states, and other countries’ wheat production will affect 2012/13 marketing year prices and the potential profit of the 2013 wheat crop.