Posted by: usset001 | December 15, 2010

Plan Updates: Post-Harvest Marketing of 2010 Spring Wheat

At the end of August, wheat prices had stalled at higher levels (Sep’10 @ $7.00) after an incredible five week run that began in early July. Basis was punishingly wide at 90 cents under the Sep’10 contract. Carrying charges were positive but small (about 13 cents from Sep’10 to Mar’11). Just as I would eventually do in soybeans and corn, I chose to sell the carry in my post-harvest marketing plan, simply as a way to buy time for a better basis in the early months of 2011.

What’s happened since August? Futures traded in a wide range until early December, when problems with wheat crop in the Southern Hemisphere put new life into a bull market. MGEX March wheat futures are trading about $1.75 per bushel higher than August values. As long as spotters continue searching for another Noah’s Ark in Australia, the wheat market will remain interesting.

Like corn and soybeans, the wheat basis has narrowed since harvest. Basis levels of 100 cents under the Sep were very common throughout the Red River Valley at harvest. Today, 50 cents under the Mar’11 contract is a common bid. I’m a bit disappointed – I was hoping for 25-30 cents under the Dec’10 contract by late November. I suppose my original hopes for a basis of 5-10 cents under the March contract by late February will also prove too ambitious.

Selling a modest carry at harvest prevented me from enjoying higher prices, but basis is slowly cooperating. I intend to have my post harvest marketing of wheat completed by the end of February and the end results should be good, with an average cash price approaching $7 per bushel. I’ll let someone else worry about the fact that I didn’t sell the high.

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