On Feb. 24 in Medford, Okla., wheat may very well be ahead contracted for harvest supply for $6.51. At this writing, wheat could also be ahead contracted for about $6. In comparison with the mid-March 2020 wheat for ahead contract price of $4.25, $6 is a comparatively good price for June/July 2021 delivered wheat.
Might 2021 harvest wheat costs be greater? You guess they may. Might wheat costs be decrease? Sure, however on condition that the U.S. exhausting purple winter (HRW) wheat crop is the subsequent exportable world wheat to be harvested, considerably decrease costs, $1 or extra, have comparatively low odds.
Occasions that might lead to $7 wheat embody below-average Oklahoma, Texas, and Kansas wheat manufacturing; a decline in wheat manufacturing wheat expectations for Russia/Ukraine; and/or world wheat manufacturing decrease than projected.
Because the U.S. HRW wheat crop comes out of dormancy, the market is searching for indicators of freeze injury. Wheat is resilient and given enough precipitation and comparatively low temperatures, it can get well from freeze injury.
At this writing, the 90-day climate forecast for the HRW space is for above-average temperatures for most of the realm south of the North Dakota southern border. The farther south, the upper the likelihood of above-average temperatures.
For an space specified by a line north to south alongside the jap borders of Texas, Oklahoma, Kansas, and Nebraska to the Pacific Ocean with the highest of the realm being alongside the Nebraska/South Dakota border, the 90-day forecast is for below-average precipitation. Above-average temperatures and below-average precipitation improve the chances of below-average yields.
Additionally growing the chances of below-average yields are the drought situations within the Texas Panhandle up by western and the northern half of Kansas, north up into Canada and west to the Pacific Ocean. Solely half of the Oklahoma Panhandle and a small portion of western Oklahoma are in drought situations (Determine 1). These unfavorable forecasts cowl many of the HRW and exhausting purple spring wheat areas.
Russian 2021 wheat manufacturing is projected to be 2.7 billion bushels in comparison with 3.1 billion bushels in 2020. Manufacturing of two.7 billion bushels or much less can be optimistic for wheat costs.
It is my perception that Russia has a tendency to underestimate wheat manufacturing and the quantity of wheat out there for export. On Might 15, 2020, Russian wheat manufacturing was projected to be 2.83 billion bushels. Within the March 2021 WASDE report, 2020 Russian wheat manufacturing was estimated to be 3.13 billion bushels.
A adverse for wheat costs is the Worldwide Grain Council’s 2021/22 projected 29- billion-bushel document world wheat crop in comparison with IGC’s 2020/21 document world wheat manufacturing estimate of 28.4 billion bushels. Additionally adverse for costs is projected document world 2020/21 wheat ending shares. Ending shares for the foremost exporters (Argentina, Australia, Canada, Kazakhstan, Russia, Ukraine and the USA) are projected to be equal to the five-year common. A reality is that the world’s wheat provide is greater than enough.
Increased U.S. wheat costs in the course of the wheat harvest and decrease costs all through the advertising and marketing 12 months are per USDA’s 2021/22 projected common annual wheat price of $5.50. If wheat costs are above $5.50 ($6) throughout wheat harvest, to common $5.50 for the advertising and marketing 12 months, costs should go beneath $5.50 later within the advertising and marketing 12 months.
The present market scenario helps $6 wheat in the course of the 2021 Oklahoma/Texas wheat harvest. The world wheat scenario might help wheat costs beneath $5.50, which makes a $6 ahead contract a comparatively good price.