Not much has changed in the wheat market. During April KC July wheat contract prices fell from $4.88 (1st), to $4.54 (11th), to $5.04 (20th), and $4.74 (27th). KC July wheat contract price continues to trade in the $4.54 to $5 sideways price pattern. The good news was the 50 cent price increase after rain over much of the hard red winter (HRW) wheat area. The bad news is that prices couldn't establish an uptrend by closing above $5 two consecutive days.
Oklahoma, Texas and Kansas wheat condition is significantly better than last year. Oklahoma's wheat is estimated to be 59 percent good to excellent (G to E) and 5 percent poor to very poor (P to VP) compared to 37 G to E and 25 P to VP last year. Kansas wheat conditions are estimated to be 53 percent G to E and 11 percent P to VP compared to 26 percent G to E and 31 percent P to VP. Improved crop conditions may offset the 9 percent less planted acres.
Since April 1, the forward contract basis has declined about 15 cents. The current forward basis, at local elevators, ranges from a minus 74 cents to a minus 60 cents. On April 27, 2015, the forward contract basis range was a minus 45 cents to a minus 7 cents. The difference in basis may be due to more wheat in storage than last year and some concern about 2016 wheat test weight and protein levels.
Wheat prices are depressed due to record world wheat stocks, relatively high feed grain stocks, and questionable quality of the wheat in storage. I suspect that if the 2016 wheat is relatively high test weight and with 12 percent protein or better, the basis and the KC wheat contract price will improve.
A market strategy to consider is selling wheat using price and target dates. For example, all wheat will be sold by December 31. The plan had the first 20 percent to be sold by September 30 or $4.50, whichever happens first. Cash prices hit $4.54 on Sept 14 so the first 20 percent was sold for $4.54. The second 20 percent lot was scheduled to be sold for $4.75 or Oct 15, whichever one happened first. The wheat price peaked at $4.68 (below $4.75) on Oct 6. The wheat was sold on October 15 for $4.45. The next 20 percent will be sold for $4.68 or November 10, whichever one happens first. The price didn't reach $4.45 so was sold for $4.10 on November 10. The final 20 percent will be sold for $4.45 or on December 31, whichever occurs first. On December 10, the cash price is $4.35, which is up from $4.01 on Dec 1.
There just has to be a way to know when to sell wheat and when to store it. In reviewing some old files, I found a one-page guide on how to determine which marketing strategy to use at harvest. The strategies included sell cash, hedge, store, and option strategies. The signals were if the basis and/or the KCBT Dec futures price were above or below normal. I collected cash prices, basis and futures prices from 1970 to present and evaluated the signals. The result was that the basis is a relatively good indicator if a storage hedge will work. The futures price was useless as a signal.
The research is not complete, but my expected conclusion has been published by Carl Zulauf (Ohio State University) and Scott Irwin (University of Illinois), "With few exceptions, the field crop producers who survive will be those who have the lowest cost of production because efforts to improve revenue through better marketing of the commodity produced will meet with limited success over time."..."A good marketing program starts with a good program for managing and controlling the cost of production."