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KIM'S SOAP BOX

Market Analysis

 
Friday, June 14, 2019
(archives
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   For an Oklahoma wheat harvest report, go to https://www.okwheat.org/index.php scroll down to and click Harvest Report 2019. Cash wheat prices increased about 17 cents this week with most Oklahoma cash wheat prices in the $4.60 to $4.75 range.

   Higher price may have been because of relatively good export demand and news that Mexico is projected to import more U.S. wheat in the 2019/20 marketing year than during the 2018/19 marketing year. Mexican buyers imply that price, quality and transportation costs are more important than the political situation. Mexico continues to develop alternate sources of wheat. Mexican buyers indicate that they will probably visit Russia this fall to evaluate the potential for buying Black Sea wheat. Reports also indicate that Mexico is attempting to buy wheat from Germany and Poland. Mexico is projected to import about 200 million bushels of wheat during the 2019/20 wheat marketing year.

   In the June WASDE, the USDA raised the 2019/20 wheat marketing year U.S. average wheat price to $5.10. Given that Oklahoma's average annual wheat price averages 24 cents less than the U.S. price, Oklahoma's 2019/20 average price is projected to be $4.86. Over the last 10 years, Oklahoma's average price has averaged as much as 32 cents more than and 74 cents less than the U.S. average price. In April 2019, the Oklahoma average monthly price was 84 cents less than the average U.S. price.

Risk Management Strategies

 
Friday, June 14, 2019
(archives
)

   Given that research shows that in 10 of the last 11 years wheat should have been sold in the June through September time period, consider selling 1/3 of the wheat across the scales and another 1/3 before September 30. Hot, dry conditions have been reported in some Russian wheat areas and may reduce Russian wheat production. Lower Russian wheat production could result in relatively higher prices during the October and November time period.

Kim's Soap Box: Is there a way to "beat the system?"

   Date updated: Friday, April 10, 2009 (archives)

   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."