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WHEAT SCOOPS: The wheat/corn price relationship is not normal

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Relatively high wheat and corn prices create a good situation for farmers.

The relationship between wheat and corn prices may not be normal. However, both wheat and corn prices are historically high and high prices tend to be good for profit. 

On Nov. 11, 2021, the Medford, Okla., wheat price was $7.97 and the Perryton, Texas, wheat price was $8.28. Wheat may be forward contracted for 2022 harvest delivery for $7.91 in Medford and $7.78 in Perryton (Table 1). 

On Nov. 11, the price of corn in Medford was $5.58 and $6.23 in Perryton, Texas. Corn may be forward contracted for 2022 harvest delivery for $5.24 in Medford and $5.74 in Perryton. 

Current wheat and corn prices are well above the 10-year average prices. The Oklahoma 10-year average annual wheat price was $5.40 compared to the current price of $7.97 and the 2022 forward contract price of $7.91. The lowest average annual price was $3.44 (2016) and the highest average price was $7.45 (2012). 

See, COTTON SPIN: A nothing burger with unexpected Habanero sauce 

The Texas 10-year average annual wheat price is $5.44 compared to the current price of $8.28 and the 2022 forward contract price of $7.78. The lowest average annual price is $3.54 (2016) and the highest average price is $7.34 (2011). 

Current Texas and Oklahoma wheat prices are well above the highest 10-year average annual price. The current Texas wheat price is 31 cents higher than the current Oklahoma wheat price. But the 2022 Texas wheat harvest forward contract price is 13 cents below Oklahoma’s 2022 harvest forward contract price.  

The reason the Texas current wheat price is above the Oklahoma price may be due to the demand for wheat as feed. The Texas and Oklahoma wheat price relationship is expected to revert to normal by the 2022 wheat harvest. This may imply a more abundant supply of corn relative to wheat before the 2022 wheat harvest. 

During the 10 years, 2011 through 2020, Oklahoma wheat price averaged 86 cents higher than corn prices. Texas wheat price averaged 68 cents above corn prices. Currently, Oklahoma wheat prices are $2.39 above corn prices while Texas wheat prices are $2.05 above corn prices.  

After Argentina and Australia complete their wheat harvest in December, the next exportable wheat to be harvested, in the world, is the 2022 Texas and Oklahoma wheat crop. The world’s exportable wheat supply expectations may not change much between now and June 2022. Wheat prices are expected to remain relatively high.  

Corn prices may be at more risk. The U.S. exports about 33 percent of the world’s corn exports. Brazil and Argentina together export 38 percent of the world’s corn. Both countries will harvest corn before the 2022 U.S. corn harvest. A relatively large Brazilian and Argentine corn harvest could result in lower corn prices. 

Texas and Oklahoma wheat and corn prices are historically high relative to the 10-year average prices. Current Texas cash wheat prices are historically high relatively to Oklahoma cash wheat prices. Wheat prices appear to be historically high relative to corn prices. 

These price relationships may be contrary to historical norms, but relatively high wheat and corn prices create a good situation for farmers.

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TAGS: Outlook
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