Wheat Market Situation
 

July wheat futures have continued to trend downward throughout April after rallying nicely during March. It looks like traders want to test the contract low of $2.57 ½ established at the end of February. The smallish U.S. crop has already been factored into prices and we are likely past the most critical time for any major weather scares to stimulate traders. Despite a 10 percent reduction in total supplies this year prices cannot rally.

Demand for U.S. wheat has been basically stagnant throughout the decade of the 90s and there are no signs of any change. Weak foreign demand remains the primary feature of the market with no change seen in exports. Domestic food use will make a small gain over year ago levels but will be offset by a reduction in feed use. Ending stocks will be drawn down somewhat but will also remain at a high level at nearly 35 percent of use.

Season average prices are projected by USDA to average about $2.80 but it is unlikely to reach that level. Current cash bids in the $2.30 range across the state are indicative of low buying interest. Consider cash sale at harvest and purchase of call options to re-enter the market. If USDA is correct in their projection, then a post harvest rally would provide a nice return on the call option premium.

Also, you may want to check in with the FSA office to get the details of the loan rate and mechanics for claiming the Loan Deficiency Payment (if one is available) before you lose beneficial interest in the crop.

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