— From Southwest Farm Press
Kim Anderson, Oklahoma State University
The Kansas City Board of Trade (KCBT) July wheat contract price was $6.15 on May 1, $7.26 on June 1, and $6.23 in mid-June. Some analysts credit the price rally on Fund buying and the downtrend on Fund selling. Most analysts that I read and talked to said there was too much wheat in storage and that the price rally would not hold. And they were right.
Since May 1, the local elevator basis has improved about 10 cents.
If U.S. and world wheat production expectations are met, wheat prices are expected to decline. The expected Dec. 1 central Oklahoma price is $5.20 and the expected Texas panhandle price is $5. This is $0.50 lower than cash prices posted on the day of this writing.
In the June Wheat Supply and Demand Report, the USDA projected that the 2009-2010 wheat marketing-year national average wheat price would be between $4.90 and $5.90 with a mid-point price of $5.40. At this writing, the Texas panhandle cash price is about $5.50 and the Oklahoma price is about $5.70.
The relationship between Oklahoma or Texas prices and the national average price changes over time. During the last two years, Oklahoma’s price averaged about 30 cents below the national average price. Between the 2001-2002 and the 2006-2007 marketing years, Oklahoma’s average annual price averaged about 10 cents less than the national price. The Texas panhandle price has averaged 15 cents to 20 cents less than the central Oklahoma price.
If the U.S./Oklahoma-Texas wheat price relationships hold and the USDA’s mid-price projection is correct, the 2009-2010 marketing-year average annual Oklahoma wheat price will be $5.10, and the average annual Texas panhandle price will be $4.90. This is about 60 cents lower than the current cash prices.
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