Posted by: usset001 | September 4, 2009

Spring wheat prices

wheaticonIn mid-July, I pondered the possibility of establishing new life-of-contract lows in new crop contracts for corn, soybeans and spring wheat. It did not take long after that for the Minneapolis September spring wheat contract to blow through the previous L-O-C low of $5.60, on its’ way to a close under $4.92 last night. This was a contract that peaked at $12 in March of 2008. Ouch.

What happened to wheat prices? I’ve heard it said that great crops – bumper crops – are made when marginal areas of production deliver the goods. In other words, we generally expect the fertile grounds of the Red River Valley to deliver a good crop most every year. It’s when the dryland production areas of western North and South Dakota have a crop that a good crop becomes a bumper crop. I am hearing stories of 40-50 bushel wheat in significant parts of the western half of the Dakotas. And typical of a cool summer with adequate moisture, wheat farmers are wondering what to do with all these bushels while flour millers are wondering where they will find high protein wheat.

Futures price levels are pain enough – low protein discounts of $1 or more are rubbing salt in the wound.

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