Not much is expected to happen in the wheat market between now and January 15, 2016. The early January price will set the price starting point for 2016 calendar year wheat.
At this writing, cash wheat prices range from $3.87 in southern Oklahoma to $4.16 in north central Oklahoma. Texas wheat prices range from $3.54 to $3.94 in the Triangle Area from Plainview to Canyon to Farwell; from $3.94 to $4.09 north of the Canadian River; and from $3.78 to $3.89 for the area south of a line from Plainview to Muleshoe. Oklahoma and Texas prices are near the lows set in late November, and are the lowest since July 6, 2010.
At this writing, the KC March wheat contract (current nearby contract) price is $4.69. On November 23, the December wheat contract (nearby contract) bottomed out at $4.49, which was the lowest nearby KC wheat contact price since June 2010 ($4.55). On November 23, the KC March contact price was $4.65, compared to the December contract price of $4.55 (a 10 cent positive spread).
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One last point is that the basis (local cash price minus the KC March wheat contract price) is now 10 cents lower than it was on November 23. The KC March wheat futures contract price is 16 cents higher than the November 23 contract price.
Price movements between Thanksgiving and early January tend to be erratic. Market volume is sometimes low, which facilitates price volatility, with relatively little market activity. By January, wheat harvests in Argentina, Australia, and South Africa will be complete. The next wheat to be harvested will be in India, Pakistan, and North Africa; these harvests start in March. China’s what harvest begins in April.
After the Argentine and Australian harvests are complete, the next exportable wheat to be harvested is the U.S. winter wheat crop. On January 1, 2016, the 26.9 billion bushel record 2015/16 wheat crop will be in the bin. The projected 8.9 billion bushel ending stocks will already be factored into the market.
Odds are that the November KC wheat contract price ($4.49) will be the price floor until wheat comes out of dormancy in March. There is a possibility that value of the U.S. dollar against other currencies will increase, resulting in a new price floor before January 15; however, this situation is very unlikely.
After the ‘tax” wheat is sold in early January, expectations for 2016 wheat production will be the biggest determinant of price movements. After U.S. and world winter wheat comes out of dormancy, 2016/17 marketing year production expectations will drive prices. In other words, weather in the U.S. and around the world will be the major price determinant. Below average 2016 U.S. wheat production would have the potential to cause wheat prices to increase from the current $4.00 to $5.00.
Relatively large price increases have to be the result of below average foreign wheat production. A small portion of this potential (reduction in foreign production) price increase could be from production expectations during the April through June time period. But the largest potential price increase is during the July through November 2016 time period.
Not many potential wheat market surprises are left in the 2015 calendar year. Unexpected export demand could result in a 25 cent to 30 cent price increase — though this is not very likely. An increase in the dollar index could result in 10 cent to 20 cent lower prices — again very unlikely.
Wheat prices just do not have much potential to change very much until after January 15, 2016.