Kim Anderson Advises Producers to Stagger Their Wheat into the Market as Wheat Follows Corn PricesFri, 20 Sep 2019 14:44:30 CDT
Oklahoma State University Extension Grain Market Economist Dr. Kim Anderson compiled the following grain market analysis. In addition, Anderson offered his advice to producers on how they might use the analysis to modify their marketing strategies.
The KC December wheat contract price is fighting the $4.10 resistance. Wednesday and Thursday's closes were $4.0975 and $4.095. Friday's KC Dec traded between $4.0675 and $4.1175 and closed at $4.075. Two KC Dec contract closes above $4.10 would imply a target price of $4.20. Recent sideways movements and contract price increases broke the short-run downtrend. Two closes above $4.30 would establish a short-run up-trend. To break the long-run downtrend that was established in August 2018, the KC December wheat contract needs to close above $4.40.
Russia sold hard milling wheat to Egypt for $211/mt C&F (cost and ocean freight). To compete, Oklahoma's wheat price would have to be $3.52 ($211 x 0.217216 = $5.74/bu.; - $0.82 C&F; -$0.20 handling; - $1.20 Houston/Oklahoma spread). The current Oklahoma wheat price is about $3.80. France offered soft red winter milling wheat to Tunisia for $210.48 C&F ($5.73). Adjusted to FOB New Orleans, the price would be about $4.91. New Orleans SRW wheat bid was $5.60. The Texas gulf HRW wheat price is $5.10.
Black Sea exporters (Russia, Ukraine, and Kazakhstan) are predicted to produce 4.151 billion bushels (bb) and use 4.284 bb. Black Sea exporters' ending stock are projected to be 369 million bushels with a stocks-to-use ratio of 9 percent. This implies that Black Sea exporters are projected to be essentially out of wheat by the beginning of the 2020/21 wheat marketing year. Any reduction in 2020 wheat production by the Black Sea exporting countries would have a positive impact on wheat prices.
Ten out of the last 11 years, wheat should have been sold before September 30. Producers should consider staggering wheat into the market; KC December call options can be bought for about 17 cents. KC March 420 calls are about 24 cents. Producers should consider stopping storage costs by selling wheat and buying calls. Corn crop condition reports and analyst estimates of corn production will determine if wheat and corn prices break out of the current price ranges. Expect wheat to follow corn prices.
Source - Oklahoma State University
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