Between June 24 and July 23, wheat prices fell from about $8.40 to $7.27. With 38-bushel per acre wheat (Oklahoma’s average), $1.13 equals about $43 per acre. Texas’ average production was 30 bushels per acre (~$34). $7.27 is not as good as $8.40. However, $7.27 is still a relatively good price.

Since 1960, August has never been the “best” month to sell wheat. This fact does not mean that wheat prices are always higher after August than during August. It means that prices have always been higher before August or after August. The question is, “Will wheat prices bottom out and go higher or go lower between now and October?”

My prognostication is that wheat prices will be higher in October than in August. Foreign wheat production, including Argentina and Australia, and U.S. corn production will be the major factors determining wheat price changes.

Wheat prices have declined because both U.S and world wheat stocks are projected to increase. United States wheat ending stocks are projected to increase from 306 million bushels to 537 million bushels. This figure is above the five-year average of 447 million bushels.

World wheat ending stocks are projected to increase from 4.3 billion bushels to 4.9 billion. This figure is near the five-year average of 5.0 billion bushels.

The five-year average U.S. wheat price is $5.01. The odds of wheat prices going to the 5-year average are about 5 percent.

Major wheat harvests that will impact wheat prices are Canada, Argentina, and Australia. Canada is projected to produce 900 million bushels compared to 737 million bushels last year and a 5-year average of 892 million bushels. Canada’s wheat harvest normally starts in mid-August. Canada’s average wheat exports are 610 million bushels per year.

Argentina’s wheat production is projected to be 533 million bushels compared to 588 million bushels last year and a five-year average of 560 million bushels. Argentina’s wheat harvest normally starts in mid-November. Argentina average wheat exports are about 380 million bushels per year.

Australia’s wheat production is projected to be 919 million bushels compared to 479 million bushels last year and a five-year average of 710 million bushels. Australia’s wheat harvest normally begins Nov. 1 and goes through Dec. 31. Australia normally exports 450 million bushels per year.

United States corn production is projected to be 11.7 billion bushels compared to 13.1 billion bushels last year and a five-year average of 11.7 billion bushels. Corn five-year average production numbers may be deceiving because corn required for ethanol use has increased from 1.2 billion bushels in 2003/04 to an estimated 3.9 billion bushels in 2008/09.

United States corn ending stocks are projected to decline from 1.6 billion bushels to 833 million bushels. Some analysts have predicted corn ending stocks below 500 million bushels. Tight corn stocks should increase the demand for wheat for use as feed.

Current wheat prices are based on the above production and ending stocks projections. Deviation from these projections will determine whether wheat prices increase or decrease.

Based on Kansas City Board of Trade (KCBT) September and December wheat contract prices and normal basis increases, the November wheat price should be – higher than the August price.

At this writing, the KCBT December wheat contract price is $8.36 compared to September’s $8.12. The market expects the November price to be about 24 cents higher than the August price.

The basis normally increases 11 cents between August and November. This fact implies that with current supply and demand expectations, wheat prices are expected to increase between 24 and 35 cents per bushel between now and November.

The one thing that is known is that actual production will not match expectations, and the difference will result in price changes, up or down, that will be greater than 35 cents.

If you can afford to sell wheat for 50 less than the current price, store the wheat until October or November. If you cannot afford a lower price, sell the wheat now.