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Agricultural News


Wheat Analysis with OSU's, Dr. Kim Anderson

Mon, 08 Jun 2020 12:39:45 CDT

Wheat Analysis with OSU's, Dr. Kim Anderson In two days last week, wheat prices increased 21 cents only to decrease 11 cents the next day.
When developing a marketing plan for selling 2020 harvested wheat, producers should consider that the USDA projects 2020/21 wheat marketing year wheat production to be a record 28.2 billion bushels. Wheat use is projected to be 27.8 billion bushels. World wheat ending stocks are projected to increase from the 2019/20 marketing year record 10.8 billion bushels to a new record 11.4 billion bushels.
Even if 2020/21 world wheat production is 600 million bushels lower than expected, world wheat stocks would still be the same as last year. No change in wheat supply would imply no change in wheat prices.
Expected world wheat production implies that the odds of higher wheat prices are slim. In 10 of the last 12 wheat marketing years, the highest price was received by selling wheat before September 1. In 11 of the 12 years, the highest prices were received by selling wheat by
October 1.
Oklahoma wheat prices could possibly hit $5.00 or higher. This result would require a reduction in world wheat production, especially in the Black Sea region. In 2010/11, Oklahoma wheat prices went from an average June price of $3.75 to an average February price of $7.23.
One way to protect against this one out of 12 year price move is to sell the wheat at harvest (the basis is relatively strong) and buy at the money KC December wheat call option contracts. At the money December call options cost about 32 cents per bushel reducing the price received from about $4.50 to $4.18. However, about five cents per bushel per month storage will be saved.
   

 

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