When I started this job as Oklahoma Cooperative Extension Grain Marketing Specialist in 1982, producers told me, “Kim, just tell us what the price and weather will be, and we’ll do the rest.” I attempted to do the price part, but my accuracy was . . . limited. 

Later a producer told me that he figured out how to sell his wheat, “I just listen to what you have to say and do the opposite.” I replied, “You’re right about half the time aren’t you?”  

It took me about six years to learn that there are very few people that can predict prices accurately enough to make a profit from buying and selling commodities and that producers can’t, and neither can I. That’s when I reviewed the Efficient Market Theory. 

The Efficient Market Theory stipulates that all available supply and demand information is used to determine prices. Prices are determined by using market information to determine whether to buy or sell a commodity. 

The question became, “What makes today’s price different from yesterday’s price?” The answer is “new information!” 

If you agree that new information is used by the market to determine prices then, by definition, prices can’t be predicted. So, how is a profit earned by buying and selling a commodity? 

Profit may be earned by obtaining relevant information before anyone else in the market. But, having the information first isn’t sufficient to consistently make a profit in the markets. 

Related:2024 may mark end of aggressive interest rate hikes

To consistently make a profit in the market, information must be obtained first and then analyzed better than the other market players. Even large companies have losses and sometimes large ones. 

Prices do tend to run in trends, cycles, and within certain ranges. A problem with trends and cycles is predicting tops and bottoms plus timing the price moves. Cycles and trends are useful tools but, by themselves, are not sufficient to make a profit marketing. 

In Oklahoma and Texas, wheat prices tend to be the highest during the June through August period (Table 1).  Reviewing June 2009 through the November 2023 prices, the highest monthly average price was in June is six of the 15 years. The average July price was the highest for two of the 15 years and August had the highest average three of the 15 years. 

September (2012) had the highest average price in one of the 15 years. May had the highest average monthly price for three of the 15 years (2011, 2020, and 2021). 

If the February through May time period is removed from the decision process, December (2010), January (2020) and November (2021) replace the three years with May as the highest price. 

Related:Economists provide insight into 2024 ag economy

This analysis depends on wheat being sold at the average monthly price. A review of June 2009 through August 2023 prices using only June, July and August daily prices reveals that the average June through August price was $5.83. The minimum price was $2.55, and the highest price was $11.15. 

The average difference between the low price during the June through August period was $1.83. The lowest difference between the highest average and lowest difference was $0.78 (2013) and the highest difference was $3.42 (2022). 

Average prices and the variability of prices show the importance of staggering sales during the June through August time period. Also implied is that the scheduled sales during any given month should be staggered. Staggering sales increase the odds of obtaining the average price rather than selling at a relative low price or a relative high price. 

Prices can’t be predicted accurately enough for producers to earn a profit from the price predictions. Staggering sales over time may solve the prediction problem.