Wheat prices rallied about 15 cents. Producers with wheat in storage sold the rally and prices fell up to 23 cents the next day. Wheat producers are just pretty good at marketing.

The one-day price increase may have been caused by two good weeks of export sales and merchandisers needing to buy wheat to meet the demand. Stored wheat is in “strong hands” (producers who own wheat and can afford to keep the wheat in storage). To get producers to sell wheat out of storage, merchandisers had to bid the price up.

Both producers and merchandisers know that U.S. wheat ending stocks are projected to be slightly less than 1.0 billion bushels, compared to a five-year average of 590 million bushels. Before the 2010 U.S. wheat harvest starts, about 46 percent of 2010-2011 marketing-year wheat needs will already be in storage.

World wheat ending stocks are projected to be about 7.2 billion bushels compared to a five-year average of 5.56 billion bushels. About 31 percent of the world’s 2010-2011 marketing-year wheat needs will be in storage when the 2010-2011 harvest begins.

Producers know that the 2009-2010 world wheat harvests are complete and that the next wheat to be harvested that has the potential to impact prices is the 2010 U.S. winter wheat harvest.

Before the 2010 U.S. winter wheat harvest begins, India’s 2010 wheat harvest will be complete. India produced 3.0 billion bushels of wheat in 2009 and the five-year average is 2.8 billion bushels.

India is projected to finish the 2009-2010 marketing year with 665 million bushels, compared to a five-year average of 322 million bushels. Below-average Indian wheat production (below average is not expected) would have little impact on U.S. wheat prices.

Both Pakistan and China begin harvesting wheat in April. Both countries have above-average ending stocks. It is unlikely that these harvests will impact U.S. wheat prices.

One reason that wheat stocks are high is that during the 2007-2008 wheat marketing year, wheat prices were historically high. With high prices, producers increased wheat planted acres.

The major reason stocks are high is because weather the last few years has been favorable for wheat production and yields have been well above average.

Relatively low prices during the 2009-2010 marketing year resulted in a 12 percent reduction in U.S. planted winter wheat planted acres. Wheat producers around the world are expected to reduce wheat plantings because of lower prices. It will still be the weather that determines yields and total production.

The expected June 2010 cash wheat price for central Oklahoma and the Texas Panhandle is $4.25. At this writing, the Kansas City Board of Trade July wheat contract price is about $5.10. Using a minus 85 cent June basis, wheat may be forward contracted for harvest delivery for $4.25 ($5.10 - $0.85).

Now is the time to develop a marketing plan for 2010 harvested wheat. The first step in a marketing plan is to produce wheat. If there is no wheat to sell, nothing else is required.

Producers should remember that it is better to have wheat to sell at a low price than little or no wheat to sell at a high price. Forty bushel per acres wheat at $3.75 producers the same per acre return as 30 bushel wheat at $5.

The optimum strategy would be to have above average wheat yields, sell one-fourth to one-third of the wheat at harvest. Have below average yield in competing countries whose harvest begin in late-July. Prices would increase and the remaining two-thirds to three-fourths of the wheat could be sold at a relatively higher price.

There is no guarantee that wheat prices will increase between June and November. However, if U.S. winter wheat yields are above average, there should be more up-side price potential than down-side price risk.