The USDA WASDE report was released Thursday, February 9. U.S. wheat ending stocks were lowered 47 million bushels (mb) to 1.139 billion bushels (bb). World wheat ending stocks were lowered 173 mb to 9.1 bb., still an excess of wheat but lower is always better than higher. The average 2016/17 wheat marketing year U.S. price was raised to $3.85 (mid-point). The average daily wheat price in Burlington, Oklahoma is $3.11. The average June 1 through Dec 31 is $3.05.
The USDA will release the first estimates of U.S. 2017 wheat production and use for the 2017/18 marketing year, February 24. Early estimates have U.S. wheat production at 1.8 billion bushels and Oklahoma wheat production at 90 million bushels. Using beginning stocks of 1.14 bb, 2017/18 wheat ending stocks were estimated to be about 900 mb. World wheat production projected price was estimated to be $4.75.
Reports indicate that Oklahoma wheat producers are not applying adequate amounts of nitrogen to reach average yields. This may have a negative impact on prices received. The posted elevator price may be $4.00 at harvest but discounts applied for low test weight and grade could reduce the price significantly. The discount for 55.6 pound wheat may be 20 cents. Foreign material discounts start at 0.5 percent (2 cents) and go to 12 cents at 1.0 percent; 24 cents at 2.0 percent; 50 cents at 3 percent.
It takes about 2 pounds of nitrogen per bushel of wheat. A report indicated that it costs about 43 cents per pound of N applied or 86 cents per bushel. At $4 wheat, $3.14 is lost for each bushel not produced because of insufficient N. This does not include the loss due to lower test weight and protein.
The new crop forward contract price is around $3.85. If the harvest price is below $3.85, it will probably be because yields and production are higher than expected. That means a lower price may be partially be offset by higher yields. If you can afford the price risk, don't price 2017 wheat.
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."