The KCBT December wheat contract closed ($5.01) near the $5 support price today, Nov 6. If Tuesday's close is below $4.95 then the next price target is $4.50. The KCBT July wheat contract closed below the $5.50 support price today. Monday and Tuesday of next week are critical trading days.
Some analysts have associated wheat price movements with changes in the value of the Dollar against other major currencies. There may be some validity that as the value of the dollar declines, the wheat price increases. Since early June, the dollar index has declined from 82 to 75 and has been trading between 75 and 77 for the last four weeks. This may be compared to the KCBT Dec contract trading between $5 and $5.50. Note that during the last four weeks, the dollar index has traded within a 2.6 percent range and wheat price has traded in a 9.1 percent range.
Hard red winter wheat producers are catching up on plantings. Wet conditions have delayed soybean and grain sorghum harvests and thus, planting wheat after these crops. Some producers have decided just to use this land for summer crops. In Southern Oklahoma, canola is being planted instead of wheat. There may be less canola acres in Northern Oklahoma than last year. Overall, Oklahoma wheat planted acres may be about the same as last year. The decrease in U.S. winter wheat planted acres will be mostly in the soft red winter wheat areas. Wheat that was to follow corn or soybeans is not getting planted and some areas, where wheat was following wheat, have not been planted.
Argentina and Australia are now harvesting wheat. No mention of this in the market news implies that production is about as expected. With above average U.S. and world wheat stocks, there is little reason to believe that wheat prices will get out of the $4.75 to $5.50 futures contract trading range. This implies cash prices in the $3.85 to $5.60 range.
December 1 is a little over three weeks away. Research shows that, over time, to sell wheat at or above the market average (after carry), wheat needs to be sold before December 1. If you believe this, you should sell your stored wheat. Wheat may be sold all at once or spread over the next three weeks.
There just has to be a way to know when to sell wheat and when to store it. In reviewing some old files, I found a one-page guide on how to determine which marketing strategy to use at harvest. The strategies included sell cash, hedge, store, and option strategies. The signals were if the basis and/or the KCBT Dec futures price were above or below normal. I collected cash prices, basis and futures prices from 1970 to present and evaluated the signals. The result was that the basis is a relatively good indicator if a storage hedge will work. The futures price was useless as a signal.
The research is not complete, but my expected conclusion has been published by Carl Zulauf (Ohio State University) and Scott Irwin (University of Illinois), "With few exceptions, the field crop producers who survive will be those who have the lowest cost of production because efforts to improve revenue through better marketing of the commodity produced will meet with limited success over time."..."A good marketing program starts with a good program for managing and controlling the cost of production."
