The USDA predicted Oklahoma's 2013 wheat production to be 114 million bushels (mb). I have not visited with anyone who thinks that Oklahoma production will be above 105 mb. The range of Oklahoma estimates have been between 74 and 105 mb. Texas at 54 mb may be too high and Kansas at 300 mb may be about right. Wheat maturity appears to be 10 days to 2 weeks behind normal. There may also be a problem of wheat in the same field being at significantly different maturity levels.
The KCBT July wheat contract price closed below the $7.50 price support level. The target price is $7.31 and then, if the price breaks through $7.31, $7.11. The short-run up price trend has been broken. To establish a down-trend, the KCBT July contract price needs to close below $7.31. Closes below $7.11 would indicate that the long-run downtrend has been reestablished and the next price target may be $6.61.
Corn prices have been supported by corn plantings being well behind normal. Some analysts believe that as much as 42 percent of the 97 million corn acres may be planted this week. If this is the case, corn plantings will still be below, but close to, the five-year average. Moisture in most corn areas is sufficient. Drought conditions still exist in Iowa and Nebraska but are expected to improve.
In the May WASDE report, the USDA projected a record 2013 world wheat crop (25.76 bb compared to 25.62 bb in 2011). 2013/14 wheat marketing year ending stocks are projected to be 6.85 bb for the world and 671 mb for the U.S. Both are below the five-year average ending stocks (6.96 bb world and 794 mb US). US wheat production may be below the 2.06 bb USDA prediction. Slightly lower than predicted production and below average projected ending stocks may imply that wheat prices need to be above average. The five-year Oklahoma average price is about $6.60.
The market is offering about $7 for forward contracted wheat for June delivery. The five-year average June price in Oklahoma is about $6.40. During the last five years, Oklahoma June wheat prices have ranged between from $3.39 to $8.89. The five-year average June price spread (bottom to top price) has been $1.37. Prices can't be predicted. A sound marketing strategy may be "dollar cost averaging." Mechanically sell wheat between now, or start at harvest, and January 1. If you are concerned about lower prices, price 10 to 15 percent of your expected 2013 production.
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."
