The marketing year (June 1 through May 31) wheat price trend is normally established in late August and early September. It is during this time period that the market gets a handle on the potential size and quality of the foreign wheat crop.
The U.S. winter wheat crop averages about eight percent of the world's wheat crop and the total U.S. wheat crop averages about 11 percent. Thus, it is mostly foreign wheat that determines the wheat price trend.
Over the next month, the European (EU-15) and Canadian wheat crops have the highest odds of impacting wheat prices. Wheat production in the EU-15 is projected to be 3.86 billion bushels compared to a five-year average of 3.52 billion bushels.
The EU-15 normally produces the second largest wheat crop, with China producing the largest. China's wheat production is projected to be 3.75 billion bushels, over 100 million less than the EU-15 crop.
This year, rain during EU-15's harvest resulted in sprout damage and below average test weight.
Some market analysts project that 40 percent of the 2000 French wheat crop is good milling quality, 30 percent is of questionable milling quality and 30 percent is feed wheat.
Even through the EU-15 is producing a record crop, exports of milling quality wheat may be limited.
Canada's wheat harvest started in late August. Weather related production problems might have reduced the amount of milling quality wheat available for export. Some analysts project that Canada's wheat exports will be lower than last year. The problem with this projection is that the harvest has just started and the size and quality will be known only after the wheat is in the bin.
Relatively tight foreign wheat stocks have resulted in the market also watching U.S. winter wheat planting conditions and wheat growing conditions in Argentina and Australia. The market normally does not watch these crops until after the foreign wheat crop is harvested.
Winter wheat producers in the Great Plains normally start planting in late August and early September. Hot, dry weather has delayed planting.
There are also minor concerns about Australia's wheat crop. Market analysts are watching daily weather patterns in both Argentina and Australia.
As one analyst said, "wheat prices are going up, the market just doesn't know it yet." I admit that the stage is set for higher prices. All that is needed to establish an up-trend is for Argentina and/or Australia's wheat crop to be below average. Canada and Europe's wheat situations make Argentina and Australia's crops more important.
Market prices may not react as fast with continued hot and dry weather in the Great Plains as with lower Argentine or Australian production expectations. But poor planting conditions would help wheat prices.
Key prices to watch are the Kansas City Board of Trade (KCBT) and the Chicago Board of Trade (CBT) December contract prices.
If the KCBT December contract price closes above $3 for two consecutive days, the contract price should increase to $3.20.
Two continuous closes above $3.20 will indicate that the up-trend should continue to $3.40.
If the CBT December contract has two consecutive closes above $2.70, the price should increase to $2.90. Two consecutive closes above $2.90 will indicate the price trend will continue to $3.10.
Foreign wheat stocks and quality will have a major impact on the nearby wheat price trend. A record U.S. corn harvest may temper wheat price increases over the next few weeks.
In the near-term, wheat prices do not have much downside pressure and may move sideways in a 20 cent pattern. Storing wheat for later sale has about 5.5-cent per bushel per month risk.