At this writing, cash wheat prices in Oklahoma and the Texas Panhandle range from about $4.25 in southern Oklahoma and the Texas/Oklahoma Panhandle to about $4.50 in central and northern Oklahoma. At mid-July, prices ranged between $5.50 and $5.90.
Some local elevators are forward contracting wheat for 2016 harvest delivery at 25 cents less than the KC July 2016 wheat contract price in central and northern Oklahoma, and 50 cents less than the KC 2016 wheat contract price in southern Oklahoma and the Panhandle region. At this writing, the forward contract price range is between $4.85 and $5.10.
$4.85 to $5.10 is a relatively good price projection for June 2016 cash wheat.
Wheat prices January 1 2016 will depend mostly on production in Argentina and Australia. Currently, Argentina is projected to produce a below average crop, and Australia’s production is projected to be about average. January 1 wheat prices are not expected to be much above current price levels.
The 2015/16 wheat marketing year has been just the opposite of the 2010/11 marketing year (see Figure 1). In June 2010, the Oklahoma/Texas wheat price was near $3.50. Both world and U.S. wheat ending stocks were near record high levels, and 2010/11 wheat production was projected to be at a near record 24.7 billion bushels.
Starting in June 2010, nearly every private wheat production estimate and USDA’s WASDE wheat production estimates were lower than their previous estimates. By September, the USDA’s WASDE world production estimate was down to 23.6 billion bushels and the price trend was up. Wheat prices had increased from $3.50 in June to $5.80 in late August 2010.
Projected record crop
During the 2015/16 wheat marketing year, nearly every world wheat production estimate has been higher than the previous estimate. Currently, the USDA projects world wheat production to be a record 26.7 billion bushels, which would be the third year in a row with record world wheat production.
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Another difference between the 2010/11 marketing year wheat market situation and the current wheat market situation is the value of the U.S. dollar compared to other major currencies. The index of the U.S. dollar to other currencies currently is about 96, compared to about 75 in August 2010. This explains about $1.25 of the difference in prices.
Wheat prices are on a strong downtrend (see Figure 1). The chart shows that prices bottomed out at $3.31 in June 2010. Another record world wheat crop in 2016 could take prices to the $3.50 level.
On average, by September 1, 80 percent of the marketing year’s world wheat production has been harvested. Argentina’s and Australia’s 2015/16 wheat crops (yet to be harvested) are in relatively good condition.
A price rally?
If Argentina and/or Australia’s wheat production is less than expected, we could see a price rally. However, relatively high world wheat stocks and the high value of the dollar compared to other major currencies would probably limit any rally.
If the 2015/16 wheat marketing year is like the 2009/10 marketing year, we may not know until June or July 2016 whether wheat prices could possibly establish a long-run price uptrend.
Given current conditions, the expected January price is $4.60, and the expected mid-June 2016 price is $5.00. Southern hemisphere wheat production will determine if these price projections are too low or too high.