Wheat Prices Being Buoyed by Weather

April 18, 2011 10:14 AM

By Kim Anderson, Oklahoma State University Extension grain marketing specialist

Drought conditions continue in major portions of the hard red winter wheat area and flooding and rain continues in the northern spring wheat area. Soft red winter wheat conditions have improved. Traveling in Oklahoma, Texas and Western Kansas makes it difficult to visualize a 2.1 billion bushel wheat crop in the U.S. and above average world wheat production. Both are possible.
There is market chatter about corn prices being equal to or above wheat prices. This is true for the Chicago Board of Trade wheat and corn prices. The KCBT May wheat contract price is about $1.20 higher than the CBT May corn contract price. Still relatively high corn prices may support wheat prices.
There are rumors that Russia may resume wheat exports after the 2011 harvest. Wheat exports out of the Black Sea ports have a strong price advantage over U.S. wheat exports for the North African and Middle Eastern markets. Concerns about raising food and agricultural commodity prices - increased demand for higher protein diets in China, India and other Middle Eastern countries - may result in continued speculative investment in wheat, corn and soybean futures markets. Some analysts indicate that agricultural commodity prices may increase at a faster rate than petroleum and metal prices.

Current Market Analysis

Little change in the supply and demand conditions and wheat prices declined about $0.70 ($8.33 to $7.63). One cause of the price decline may have been Goldman Sachs' advice to investors to sell commodities. Both large speculators and some funds liquidated long wheat contracts.
The KCBT July wheat contract closed Friday, April 15 at $8.76. The KCBT July wheat contract has price support at about $8.50 and resistance about $9.00. Closes below $8.50 imply a price target of about $8 and closes above $9 imply a price target of about $9.50.

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