Menu

Wheat Price Lower and Upper Bounds

Going back 25 years, the monthly average high price of wheat in Oklahoma and the Texas Panhandle was about $10.60 (March 2008). The single daily highest price was March 12, 2008 ($12.62). The monthly average lowest price of wheat was $2.07 (December 1999).

Most analysts will agree that an upward shift of wheat prices occurred during the 2006/07 wheat marketing year (Figure 1). Between 1990 and June 2006, KC wheat contract prices tended to trade between $2.50 and $5. KC wheat contract prices were above $5 between October 1995 and July 1996, which was a period of extremely tight stocks.

Since June 2006, KC wheat contract prices have mostly traded between $4.50 and $10. The contracts did trade above $10 between December 2007 and March 2008. Because there was little wheat for sale during this time, most analysts tend to discount any odds of wheat contract prices going above $10.

The above discussion implies that future KC wheat contract prices are expected to trade between a low of $4.50 and a high of $10.

During the period June 2008 through July 2010, KC wheat contract prices traded in a price range between $4.50 and $7. During August 2010 through October 2014, KC wheat contract prices were between $6 and $10.

KC wheat contract prices may be divided into three major price ranges – $4.50 to $6, $6 to $7, and $7 to $10. The lows and highs of these ranges are not price points but areas.

During the 2014/15 wheat marketing-year and with projected relatively tight U.S. wheat ending stocks (644 million bushels) and average world wheat ending stocks (7.1 billion bushels), KC wheat contract prices challenged the $6 price support. In November and December, KC wheat contract prices traded as low as $5.50 for short periods of time. But, the price always returned back to the $6 area.

For future KC wheat contract prices to establish a trading range between $4.50 and $6, U.S. wheat ending stocks need to be above 775 million bushels and world wheat ending stocks above 7 billion bushels.

Look at corn
CBT corn futures contract prices may be used to support this conclusion (Figure 2). Between January 1990 and October 2006, CBT corn contract prices mostly traded in a range between $1.80 and $3. In November 2006, CBT corn contract prices shifted to a new trading range between $3 and $8.

When U.S. corn ending stocks were less than about 1 billion bushels, CBT corn contract prices tended to trade in the $5.50 to $8 range. When ending stocks were near the 1.2 billion bushel level, CBT corn prices traded between $4.25 and $5.50. Corn ending stocks above 1.6 billion bushels resulted in CBT corn prices in the $3 to $4.50 range.

Source: Kim Anderson, OSU Extension economist, and Mark Welch, Texas A & M AgriLife

Recent News

COVID-19 Impacting Food Purchasing Dynamics, As Ag Labor Concerns Persist
4/3/2020

Wall Street Journal writer Kirk Maltais reported this week that, “Consumers’ rush to buy groceries is fueling a rally in orange-juice prices, making the usually sedate asset the best-performing commodity in the first quarter of 2020. “The price of frozen orange-juice-concentrate futures trading on the Intercontinental Exchange has surged 24% to more than $1.20 a pound since March 19—a run resulting from […]

During COVID-19 Outbreak, Some Countries Restrict Ag Exports
4/2/2020

Wall Street Journal writers Kirk Maltais and Joe Wallace reported this week that, “Consumers are loading up on pasta, rice and bread. Farm supply lines are disrupted. Countries are restricting agricultural exports. The result: Prices of wheat and rice, two of the world’s staple grains, are rising sharply. Difficulties moving grain within countries and across borders, coupled with […]

Old-Crop Cash Flow Considerations Under COVID-19
4/1/2020

Reductions in the sales value of unpriced grain likely will be the first place where grain farms feel the impacts of COVID-19 control measures. Overall, old-crop sales likely will be reduced from expectations prior to COVID-19 concerns. Some farms will be more impacted by these concerns than other farms. Before discussing old-crop cash flows, a […]

Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now