by Kim Anderson, Oklahoma State University Professor and Extension Economist
This week, KCBT wheat contract prices broke the $5 resistance level. The next resistance point for the July wheat contract is about $5.38. A problem is that some analysts report that the price rally may be due to fund traders offsetting their short positions by buying wheat contracts. If this is the case, the rally may be short-lived.
Some analysts speculated that wet fields would delay spring wheat and corn field work. Delayed field work could have resulted in less planted acres and potentially lower yields. Reports indicate that field work and plantings are progressing well. It does not appear that wet fields will result in fewer planted acres, nor will they cause wheat prices to increase.
Wheat stocks should remain an albatross on wheat prices. For hard red winter wheat prices to go above $5, U.S. wheat production needs to be less than 1.9 billion bushels. The 2010 wheat production estimates range between 1.95 and 2.0 billion bushels. World wheat production needs to be below 22.5 billion bushels.
For U.S. and world wheat stocks to decline to the five-year average, 2010 U.S. wheat production needs to be less than 1.8 billion bushels. World wheat production needs to be less than 21.5 billion bushels. Production at these levels could result in soft red and hard red winter wheat prices approaching the $6 level. United States winter wheat conditions indicate that yields will be above average. Higher yields may partially offset the 13 percent reduction in winter wheat planted acres.