“Let someone else take the risk” appears to be the general opinion in both the stock markets and the commodity markets. Nearly all the grain future contract price trends are down. There are several reasons for the down price trends.

First is above average supply and little hope for increased demand. Corn ending stocks are projected to be over 1.94 billion bushels compared to a five-year average of 1.22 billion-bushels. Soybean ending stocks are projected to be 350 million bushels compared to a five-year average of 270 million bushels.

United States' wheat ending stocks are projected to be 834 million bushels compared to a five-year average of 690 million bushels. The five-year average U.S. price of wheat is $3.48 per bushel.

A second negative wheat price factor is the China situation. Wheat exports to China had the potential to help reduce wheat stocks. Reports indicate that Chinese farmers planted about six percent less wheat and that Chinese wheat production will be less than consumption. The result should be Chinese wheat imports. Friction between the U.S. and China reduces the odds that China will buy U.S. wheat.

A third factor may be hoof and mouth disease. Flour and feed mills do not want to get caught with wheat from areas with hoof and mouth disease. One way to avoid this is to buy wheat on an as needed basis. This will reduce the odds that wheat purchases are infected.

The last factor is the fact that flour millers are used to abundant wheat supplies. The major exporting countries (Argentina, Australia, Canada, European Union, and the U.S.) all have average or above average ending stocks. It has been easy to originate and receive milling quality wheat on a timely basis. Each major exporting country has efficient transportation and loading facilities and most importing countries have efficient unloading facilities.

Market situations have a habit of changing quickly and when least expected. For the last two years, the wheat market has been poised for higher prices. The market situation is even closer to higher prices than during the last two years.

World wheat ending stocks are projected to be four billion bushels compared to 4.6 billion bushels last year and a five-year average of 4.6 billion bushels. United States wheat ending stocks are projected to be 834 million bushels compared to 950 million bushels last year and a five-year average of 690 million bushels.

2001/02 marketing-year U.S. wheat production is projected to be 2.1 billion bushels compared to 2.22 last year and a five-year average of 2.36 billion bushels. This could result is U.S. wheat ending stocks falling to around 600 million bushels next year.

World wheat production is also projected to be below average and world wheat ending stocks are projected to fall to 3.8 billion bushels.

The major albatross around wheat price's neck is corn stocks and prices. What is needed for higher U.S. wheat prices is lower corn stocks and wheat stocks. If corn stocks do not decline, expect wheat prices to increase into the $3.40 range during the 2001/02 marketing year.

If both corn and wheat stocks decline (get closer to average stocks), wheat prices could reach $4 per bushel or higher.

If the 10 cent wheat price decline on March 30 caused great concern and turmoil, consider buying a $3.20 or $3.10 Kansas City Board of Trade July wheat put option contract for each 160 acres of hard red winter wheat. A $2.70 Chicago Board of Trade July wheat put option may be purchased for soft red winter wheat.

The KCBT $3.10 put will set a minimum price near the loan rate. If prices continue to decline, both the put value and loan deficiency will increase. The result will be a two-cent gain for each one-cent decline in the wheat prices. Think about it.