On Sept. 5, the KC December wheat contract price closed at $6.88. The contract’s support price was $6.93. Two consecutive closes below $6.93 may imply that the next target price may be about $6.65 and possibly $6.30. There is very strong price support at $6.

Oklahoma cash wheat prices are between 25 cents and 17 cents below the KC Dec contract price. Texas Panhandle cash prices are seven cents below to 10 cents above the KC Dec contract price.

The price risk is that the seasonal price trend is normally set in late-August and early-September. Wheat prices peaked early November 2012 and followed a downtrend until mid-February. The nearby KC contract price traded between $7 and $8 until another downtrend was established in late April. In late June, a $6.98 and $7.26 sideways pattern was established.

This is the third time that the KC Dec contract price challenged the $6.98 support price. With each challenge, the support price is lowered a few cents.  At some time, the number of buyers to support wheat prices will not be there to keep prices from falling.

Market factors that are supporting lower prices are record or near record world wheat production and record U.S. corn production.

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The August USDA/WASDE (World Agricultural Supply and Demand Estimates) projected 2013-14 wheat marketing year wheat production to be a record 25.9 billion bushels. The past record in the 2011-12 marketing year was 25.6 billion bushels.

Normally about 80 percent of the world’s wheat has been harvested by Sept. 1. 2013-14 wheat harvests are near this schedule. Lower than expected production in some countries are offset by above average production in other countries.

Both U.S. and foreign corn production is projected to set new records. United States corn production is projected to be 13.76 billion bushels compared to the past record of 12.4 billion bushels harvested in 2010.

Foreign corn production is projected to be 23.9 billion bushels compared to last year’s record 23.0 billion bushels.

United States corn 2013-14 ending stocks are projected to increase from 2012-13’s 719 billion bushels to 1.84 billion bushels. This is also a record increase in ending stocks both in bushels and percentage.

Less than $5 Chicago Board of Trade corn contract prices, compared to a KC wheat contract price less than $7, should result in a large reduction in wheat demand for feed. This reduced demand is expected to impact wheat prices within the next few weeks.

Another negative market factor is that moisture conditions are relatively good for most of the U.S. winter wheat area. Dry conditions persist in the Texas/Oklahoma panhandles, western Kansas and up through Colorado, Montana and Wyoming.

Positive price factors include relatively high protein and the milling quality of 2013 U.S. hard red winter (HRW) wheat and projected below average U.S. and world wheat ending stocks.

Recent reports indicate that Canada’s wheat production is slightly above expectations but that the protein is below average. Excluding U.S. HRW wheat production, 2013-14 harvested wheat protein may be below average.

Wheat ending stocks for the U.S. are projected to be below 600 million bushels compared to above 700 million bushels for 2012-13. World wheat ending stocks are projected to be 6.36 billion bushels compared to 6.40 billion last year and a five-year average of 6.96 billion bushels.

These negative price factors seem to have a slight edge over the positive price factors. The fact is that each time the KC December contract price challenges the support price it is a negative price signal.

The jury is still out, but the odds indicate that wheat prices are still on the slippery slope.

More wheat articles of interest:

Northeast Texas wheat varieties offer options

Wheat planning and planting time not too early to think about price

Wheat stocks the tightest since 2007