Kim Anderson Points to Basic Supply and Demand to Explain Rising Wheat PricesFri, 14 Mar 2014 16:21:00 CDT
Wheat prices continued to climb this week, capping a $1.50 upward move since February. Kim Anderson, Oklahoma State University Extension Grain Marketing Specialist, tells SUNUP's Lyndall Stout there are several factors impacting those rising prices.
"Of the underlying factors, the first thing is the tight wheat stocks. You've got hard red winter wheat stocks about 28 percent below the five-year average on the ending stocks. You've got total wheat well above 20 percent below average on the stocks. Then you've got dry conditions throughout the hard red winter wheat area. We're hearing more and more about a potential drought. We do have moderate drought throughout Oklahoma and it keeps moving east."
He says other factors include a report out this week showing a moderate drop in soft winter wheat acres this year, concerns over spring planting difficulties in Australia, and difficulties with the crop in Ukraine.
"I think you keep adding these things up, with tight stocks, and the market is starting to get nervous."
Anderson says that if the July Kansas City contract stays above $7.50, he expects it to run up to $7.76 with a potential for it to hit $8 per bushel next week. If it does, he says, producers should take advantage of the opportunity.
Allendale's latest crop plantings survey also shows lower wheat plantings than do other projections and Anderson that could also be a factor in the current run-up in prices and may give producers a clue as to their marketing strategy.
"As stocks go down, our potential harvest goes down, prices go up. Producers tend to worry about 'Should I take advantage of today's prices?' Yeah, probably. Just so you can sleep at night."
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