NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
April 6, 2000
George Flaskerud, Extension Crops Economist
NDSU Extension Service
The wheat market bears watching. Wheat is in the midst of the time period when its price reaches a seasonal high, on average. Even if the price is not as high as we would like it to be, it is time to consider completing old crop sales and making some new crop sales.
My marketing plan calls for selling 10 percent of new crop wheat by the middle of April and another 25 percent by the middle of May by using a futures-fixed contract. I would fix the futures price in the December Minneapolis spring wheat market. I would leave the basis open until delivery in November.
As past years have indicated, the December futures price can spend a lot of time in the $3.50 to $4.00 range during November. Recently, only in the fall of 1995 was the November average of the December futures substantially greater than $4. During November of that year, the price averaged $4.92.
There is substantial risk in doing nothing. Do no forward contracting and risk getting last fall's December futures price, which averaged $3.23 in November. Or, do no forward contracting and risk getting $2.54, the November 1990 average.
December futures closed at $3.59 on March 31, up a nickel from the previous day. What is giving the market this strength? Two USDA reports were released on March 31. One was the planting intentions report, and the other was the stocks report. Both were friendly to wheat.
The report on planting intentions indicated that farmers intend to plant 14.81 million acres of spring wheat, versus the trade expectation of 15.36 million acres, and 3.61 million acres of durum, versus the trade expectation of 3.78 million acres. Likewise, the level of wheat stocks on March 1 was 35 million bushels smaller than expected.
Will these numbers give us a sustained rally? No. The major focus from now until harvest is the weather. The National Weather Service has indicated the possibility of drought in the Corn Belt during April through June. But a drought is by no means a certainty. The higher prices that such weather concerns generate should be viewed as pricing opportunities.
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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136