What a difference rain makes. Last week, I reported that Oklahoma wheat production would be around 70 million bushels (mb). This week, the estimate is reported to be nearer 90 mb. Bloomberg's survey has Oklahoma production at 109 mb, 127 percent above last year and 9 percent above average. Unless it turns hot, dry and windy, the Oklahoma wheat crop and the hard red winter wheat crop in general will be greater than earlier expected.
Russia is rumored to be canceling the wheat export tax in mid-May. Wheat being sold for export out of the Black Sea region is reported to be $0.80 to $1.05 per bushel lower than competing exporting countries.
ADM Germany reported that European Union's 2015 wheat crop (excluding durum) is projected to be 5.1 billion bushels (bb) compared to 5.46 bb (a record crop) last year. A different report indicated that EU production would be near or above last year's production. As we (Oklahomans) have just experienced, you don't know wheat production until the crop is in the bin.
The KC July '15 wheat contract price continues to trade near the $4.89 support price. Prices below $4.89 would indicate a price target of $4.55. Oklahoma country elevator new crop basis are between about minus $0.10 (near Enid, Oklahoma) and minus $0.40 in southern Oklahoma. If the cool, moist weather continues in the HRW wheat area, the June price in central Oklahoma is expected to be near $4.50. Hot, dry, windy weather could result in prices being $5 or higher.
If you have wheat in storage, take advantage of any price rally. June 2015 Oklahoma cash wheat prices are expected to be near $5. If the market offers wheat harvest prices above the cost of production, you may want to take advantage of it with a limited amount of 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."