Market analysts have lowered both U.S. and world wheat production estimates from USDA May WASDE projections. The wheat harvests in Oklahoma and Kansas indicate that USDA’s May production estimates may be too high. Some analysts report that soft red winter wheat production will be lower than previously expected.

The International Grains Council reduced the estimate for world wheat production to 24.7 billion bushels. This is 200 million bushels less than USDA’s May world wheat production estimate. In the June WASDE report, the USDA is expected to lower its world wheat production estimate to 24.6 billion bushels.

Production estimates for Russia, Ukraine, Kazakhstan, and Australia have been lowered. France, Germany and Poland are all expected to have lower wheat production than last year.

Another reason wheat prices increased is that funds held near record short (sold) futures contract positions. Analysts’ projections indicating lower world wheat production resulted in the funds liquidating the short positions by buying futures contracts. Since there were fewer sellers than buyers, the funds bid up the price until market participants were willing to sell.

There is little reason for funds to sell additional wheat contracts. Facts show that the funds may need to liquidate more short futures contracts.

Kansas City Board of Trade (KCBT) July wheat contract prices are trading in a sideways pattern between about $6.80 (support) and $7.30 (resistance). If the KCBT July wheat contract breaks that $6.80 support, the next price target will be about $6.32. Closes above $7.30 indicate a price target of $7.50.

During the last two years, the KCBT wheat futures contract prices have traded between $4.50 and $9.90. At this writing, the KCBT July wheat contract price is $6.94. This is relatively close to the price range mid-point.

In June 2010 with the price about $4.50, the strategy was either to store wheat into the fall or sell just enough to cover harvest costs and pay some bills and store the remainder for September/October and November/December sales.

In June 2011 when the price was about $9.50, the strategy was to sell one-half to two-thirds at harvest and the remainder in the September/October and November/December time periods.

Given that the current price is near the middle of this range, the strategy to consider is to sell one-third at harvest, one-third in September/October and the remaining third in November/December.