Will High Wheat Prices Equal More Acres?

November 14, 2010 09:03 PM

Kim Anderson, Oklahoma State University

Expect KCBT March wheat contract prices to remain in the sideways pattern between $7 and $8. Friday's price closed below the March contract trend line. If Monday's March contract close is below $7.40, the target price may be $7.
Moisture and projections of increased planted acres and a higher percentage harvested wheat acres resulted in significantly lower wheat prices. Informa projected all U.S. wheat 2011 planted acres to be 56.1 million acres (ma), compared to 53.6 ma. Allendale projects U.S. winter wheat 2011 planted acres to be 41.7 ma compared to 37.7 ma last year. This is a 4 ma increase. Allendale projects lower spring wheat acres. Informa projects 2011 corn planted acres to increase 5 ma from 88.2 ma to 93.1. Allendale is using a 2 ma increase. Soybean planted acres are projected by Informa to be 2 ma less than last year. Reports from producers and elevator managers indicate that 2011 Oklahoma wheat planted acres are slightly higher than 2010's 5.2 million acres.
Relatively high wheat prices will probably result in increased world wheat planted acres. Reports also indicate that as long as weather cooperates, the harvested acreage percentage will be higher than last year.
In the November USDA WASDE report corn yields were cut 1.5 bu./acre to 154.3. Corn ending stocks were lowered to 827 million bushels (mb). Soybean yields were lowered 0.5 bushels to 43.9 bushels per acre. Soybean ending stocks were lowered from 265 mb to 185 mb. Wheat production was lowered 6 mb to 2.208 billion bushels (bb). Wheat ending stocks were lowered from 853 mb to 848 mb. On the day of the report, wheat prices initially increased and then closed down 7.5 cents.
This was after the KCBT December wheat closed above the resistance price of $7.80 two consecutive days and had closed at $7.87 on Monday before the report. The KCBT Dec contract price is now below the $7.80 resistance level.
With U.S. wheat ending stocks projected to be 848 mb and world wheat projected to be 6.3 bb, there is little reason for wheat prices to increase. Two factors contributed to the recent price rally: a 46% good to excellent crop condition rating (relatively low) and dry conditions in parts of the hard red winter wheat area.
A general rain is forecast for Oklahoma and the Texas panhandle region and snow is expected in Colorado and Montana. Much of the wheat is up and/or has been dusted in and just needs a timely rain. This may be the weekend that this timely rain happens.
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