OSU's Kim Anderson Offers Bleak Outlook on the Wheat MarketWed, 14 Aug 2019 16:44:54 CDT
Oklahoma State University Extension Grain Market Economist Dr. Kim Anderson delivered a sobering message to wheat producers gathered at Wednesday’s joint-meeting of the Oklahoma Wheat Growers Association and the Oklahoma Wheat Commission in El Reno.
Based on the current dynamics of the marketplace and the growing dominance of Russia and the hard wheat producing countries of the Black Sea Area over global export demand, Anderson conceded with all frankness and candor, that his outlook for the wheat market over the next ten years is rather bleak. Citing the most recent research on the subject, Anderson says it is expected the average price of wheat in Oklahoma at least for the next decade is likely to fall around $5.00/bu.
“So, if you can’t produce it for less than $5, you probably should look at alternative uses of that land,” Anderson remarked to Radio Oklahoma Ag Network Farm Director Ron Hays during the event, adding specific stipulations for those who continue on with the crop intending to harvest it for grain. “You can’t just produce wheat - you’ve got to produce a milling-quality wheat. That means you’ve got to produce it for less than $5, have 60 lb. test weight and 12 to 12.5 percent protein.”
You can listen to Anderson’s full conversation with Hays, by clicking or tapping the LISTEN BAR below at the bottom of the page.
For producers with grain in the bin still, Anderson strongly suggests they consider selling it. He reports that currently, the price of wheat in Oklahoma ranges from about $3.60 to $3.70 a bushel. At that price, most producers would be selling at a loss. While Anderson sympathizes, he regrets that holding out any longer might only lead to greater losses.
“I think the market is telling us they’ve got a strong basis, weak futures and to go ahead and sell the wheat,” he said, “because there’s no carry in the market.”
Alternatively, Anderson also suggests considering the purchase of a call option for either December or March. These can be purchased for approximately the same amount it would cost to store the grain until that January - March time period.
“The market is giving producers the opportunity if they want to own the wheat to come in and buy calls and not spend much more than you would on storage. I think the market is saying sell it now and protect it on the board. It’s a different strategy, but to me that’s what the market is suggesting because… If everything comes in as expected,” he said referring to the expectations surrounding the Black Sea region’s harvest, “there’s just not much room for higher prices as I see the situation right now.”
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