To producers’ chagrin, the price of wheat has fallen over the past couple week. The market is down 25 cents this last week alone, and approximately 40 cents lower looking over the last two weeks. According to Oklahoma State University Extension Grain Market Economist Dr. Kim Anderson, in an interview this week with SUNUP Host Dave Deeken, several things are at play in the market that have contributed to this price decline.
The larger issue impacting prices, he says, is that the Dollar Index increase about 3% from around 93.4 to 96.4 – essentially raising the export price about 20 cents a bushel. Compounding that issue – US export sales continue to “be in the tank,” as Anderson puts it. HRW total sales since June 1 for the US is 36% lower than last year. USDA’s prediction is that they will be down 10% for the year, yet no recovery has been made so far as countries around the world have been opting to purchase wheat from nations besides the US.
The other factor is of course, Russian production. Reports have brought conflicting information as to just how big the Russian crop is – always seeming to raise the number incrementally. Anderson says as long as Russia has wheat to sell, it will take a bite out of US price margins.
Taking into consideration the bigger picture overall, Anderson says it would be accurate to say that the domestic wheat market is being set up for a downtrend, citing the break in the $5 support level in the KC December contract falling to the July low recently of $4.93. He says if it continues to fall below that, prices could go as low as another 20 cents or so. Anderson says prices will eventually improve – but not until export sales do. That, he says, is totally dependent on when Russia runs out of wheat to sell, which he calculates will occur sometime around the first of the new year. He advises producers that can afford the 50 cent price risk to store their wheat until sometime in December or January when he believes prices are set to improve. Otherwise, he says take the emotion out of the equation and sell your wheat in lots between now and then.
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