NEWS for North Dakotans
Agriculture Communication, North Dakota State
University
7 Morrill Hall, Fargo, ND 58105-5665
July 2, 1998
George Flaskerud, Extension Crops Economist
NDSU Extension Service
The stocks and acreage reports released by USDA on June 30 were supportive to spring wheat and durum prices. But weather will ultimately be the determining factor on prices. Favorable weather could still lead to significantly lower prices at harvest. Minneapolis Grain Exchange September futures at $3.55-$3.60 is a reasonable target for buying additional put options.
The USDA reports may have reduced the downside risk somewhat for wheat prices. June 1 stocks of wheat were 27 million bushels lower than expected, spring wheat acres were 750,000 below March 1 planting intentions and durum acres were 400,000 below intentions. The two reports combined would reduce USDA's June projected 1998-99 ending stocks by about 75 million bushels, which would be a small reduction in the stocks/use ratio from .34 to .31.
Higher-than-expected yields could more than offset the impact of the reports. The premium price for Minneapolis Grain Exchange wheat futures relative to Chicago Board of Trade wheat futures is worrisome. The premium was 66 cents on June 30 for September futures. Minneapolis Grain Exchange September futures (1988-97) during the month of August, on average, have ranged from 12 cents under the Chicago Board of Trade figure to 21 cents over, excluding 1997 when it was unusually high for a short time.
The spring wheat and other crops are far from made so I am reluctant to suggest contracting. A Minneapolis Grain Exchange September put option with the right to sell at $3.50 would have cost about 11 cents on June 30. At the time, the September futures contract was trading at $3.53.
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Source: George Flaskerud (701) 231-7377
Editor: Barry Brissman (701) 231-7866