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To sell wheat: Wailing, gnashing of teeth not required

There is a tremendous amount of “wailing and gnashing of teeth” when it comes to selling wheat. Many producers feel that they can produce wheat; however when it comes to selling wheat, they feel incompetent.

Some market analysts add to producers' insecurity by making statements like, “most producers sell in the bottom third of the market.” Recent research conducted by Oklahoma State University provides a different view of marketing ( Fact is that most producers are doing a good job of marketing and producers should be more concerned with cost of production, yields and use of technology and less concerned with marketing.

Wheat purchase records were obtained from three Oklahoma elevators. One elevator was in southern Oklahoma (South), one in west-central Oklahome (Central) and the other in north-central Oklahoma (North). The elevators provided data on every wheat purchase for the nine-year period June 1992 through May 2001. Date, price, bushels and storage costs were included in the data.

We also obtained the daily price at each location. All prices were adjusted for storage and interest costs. Interest was the prime rate plus 2 percent that is often charged for production loans by major lenders.

The average price actually received by producers was compared to two marketing strategies. First was selling all the wheat at harvest and the second was to sell an equal amount of wheat each business day of the marketing year (See Table 1).

It is important to compare prices within the same elevator and not to compare one elevator's price to the others' price. For example, compare elevator South's daily average price ($3.04) to the harvest price ($3.24) and the actual average price ($3.22) received by producers.

Study findings

Over the nine-year period, producers selling to elevator South received $3.22 per bushel compared to $3.04 if they had sold an equal amount each business day and $3.24 if they had sold at harvest each year. Thus South producers beat the market average by 20 cents per bushel and could have increased the average price received by two cents if they had sold all wheat at harvest.

The average price received by producers selling to elevator Central was $3.05 compared to the $2.96 daily (market) average and the harvest price of $3.09. Central producers beat the market average by nine cents and could have increased the net price four cents per bushel by selling at harvest.

Producers selling wheat to North received an average price of $3.11 per bushel compared to the daily average price of $3.03 and an average harvest price of $3.20. The average price received was eight cents per bushel above the market average and nine cents below selling all the wheat at harvest.

Research indicates that Oklahoma wheat producers are doing a relatively good job of marketing their wheat. Selling all wheat at harvest could increase the average price but selling all wheat at harvest also increases income variability. Most producers only need to make minor adjustments in their marketing strategy. I suspect that all producers are doing a better job of selling than they expect.

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