When to Sell or Hold Wheat

May 16, 2010 07:00 PM

by Kim Anderson, Oklahoma State University Professor and Extension Economist
The market's price reaction to the USDA May 2009/10 and 2010/11 marketing year crop supply and demand estimates may indicate strength, at least the lack of weakness, in wheat and corn prices. On Monday, May 10, the day before the USDA released the supply and demand estimates, the KCBT July wheat contract declined 13 cents, and the CBT July corn contract price declined 1.5 cents. After the report was released Tuesday morning, wheat prices barely changed and corn prices increased about 8 cents. Higher corn prices may have been due to rumors that China was going to buy more corn. Later in the week, China bought 6 cargos (12 million bushels) with little price reaction.

Listen in to Anderson's wheat market advice:

The supply situation is one of excess stocks. Wheat ending stocks for the 2009/10 marketing year remained at 950 mb and the 2010/11 ending stocks estimate is 997 mb. World wheat ending stocks for 2009/10 were lowered from 7.2 bb to 7.1 bb and 2010/11 ending stocks are estimated to be 7.3 bb. United States 2010 wheat production is estimated to be 2.04 bb and world production is projected to be 24.7 bb. Reports indicate that dry conditions in Argentina and Western Australia may have a negative impact on 2010/11 marketing year planted acres.
U.S. 2010 corn production is projected to be a record 13.4 bb. The 5-year average is 11.7 bb. U.S. corn ending stocks are projected to increase from 1.7 bb in 2009/10 MY to 1.8 bb in 2010/11. World corn production is projected to be a record 32.9 bb compared to the 2009/10 MY 31.8 bb record. The 5-year average is 28.8 bb.
New crop wheat basis bids have declined, depending on location, 15 to 30 cents during the last week and up to 40 cents in the last month. Sub-terminal basis bids for June delivered wheat have declined 15 cents in the last week. The lower basis may be due to fear of 11 percent or lower protein wheat delivered at harvest. Currently there is no reported bid for May or June 11 percent protein wheat or lower for gulf delivery. For Kansas City HRW wheat, at the low end, ordinary protein is bid at minus 55 cents, 12 percent protein wheat is bid at plus 5 cents and 13 percent protein is bid at 50 cents.

For More Information
Kim Anderson's Marketing and and Risk Management

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