econ.sdstate.edu

MINNEAPOLIS
WHEAT FUTURES

The South Dakota average price for spring wheat late this past week was $5.57 per bushel, 16 cents higher than a week ago.

The South Dakota average price for winter wheat late this past week was $4.85 per bushel, 26 cents higher than a week ago.

Last week, I noted that in the last several months, the production projections for wheat have grown by 200 million bushels while usage expectations have declined by nearly 120 bushels setting the wheat market up for dealing with a growth in carryover supplies that is now projected at 885 million bushels. This is nearly a three-fold increase over the very low carryover supply of just two years ago. While wheat prices have reflected this reality with prices falling by over $2.50 per bushel from the first of June, wheat prices have made a very interesting turn to the upside since late October.

Since October 30th, the statewide average price for spring wheat in South Dakota gained nearly 90 cents through Wednesday of this past week only to lose 20 cents of that gain by Friday. The South Dakota average price for winter wheat performed much the same with a gain of nearly 80 cents from late October through this past Wednesday only to lose about 15 cents of that gain by Friday of this past week. With wheat prices as low as they were in late October, funds and other commodity investors viewed wheat as a good buy compared to other commodities and as a result, much of this rally is tied to buying unrelated to actual commercial usage or export volume. This means that this rally could be short-lived when the funds begin to take their profits and exit wheat futures. This is not to say, however, that this situation could not occur again; particularly if wheat futures were to be driven to the lows of late October or lower as time goes along. Funds may find wheat to be a good buy again if prices fall back to levels in October but with large domestic and world supplies of wheat, there seems to be little reason to expect the more typical supply/demand fundamentals to provide the kind of price support to create a rally like the one of the last three weeks. As a result, you must be prepared to make sales on the rallies and not be surprised if this rally or subsequent rallies that may occur are met with similar downturns.

USDA’s monthly supply and demand numbers from the most recent World Agricultural
Supply and Demand Estimates report are summarized in a file that is linked below. For complete details, simply click on the link entitled, “Wheat Supply and Demand.”

Wheat basis data and cash wheat price data for various regions of South Dakota is available by connecting with a link at the bottom of this page. To access the charts for your region of the state, just click on the links entitled “Spring wheat cash and basis charts” and “Winter wheat cash and basis charts”. This basis information is compiled by the Economics Department at South Dakota State University.