Wheat and corn prices are in a close relationship.

If wheat prices maintain the close relationship with corn, wheat prices and profits may dramatically decline. If corn prices fall as expected, wheat needs to divorce corn.

The Chicago Board of Trade (CBT) corn contract prices imply that corn prices will decline about $0.74 between now and November. Another $0.30 may be lost due to a declining basis. Corn prices could decline $1.20 relative to wheat prices.

Chicago Board of Trade March and July wheat and corn contract prices are about the same ($6.44 wheat vs. $6.42 corn). The CBT December contract prices show wheat prices $1.29 higher than corn ($6.97 wheat vs. $5.68 corn).

The KCBT March wheat contract price is $0.46 higher than CBT March wheat and March corn. The KCBT July wheat contract price is $0.44 to CBT July wheat and $0.56 at July corn.

The contract price spread for the December contracts are KCBT December wheat is $0.39 higher than CBT December wheat and $1.68 higher than CBT December corn.

CBT December wheat is going from about equal to corn in March and July to wheat being $1.29 higher than corn for the December contract.

Current corn prices are relatively high due to record low corn stocks.

The 2011/12 corn marketing year ending stocks are projected to be 801 million bushels. The five-year average ending stocks is 1.4 billion bushels.

Corn prices are projected to decline due to projected record 2012 corn production. The USDA has unofficially projected 2012 U.S. corn production to be 14.2 billion bushels compared to the 13.1 billion bushel record set in 2009. In 2011 U.S. corn production was 12.4 billion bushels.

USDA’s 2012/12 corn marketing year ending stocks estimate is 1.6 billion bushels compared to 2011/12 projected ending stocks of 801 million bushels.

Many analysts believe that USDA’s estimates are high, and that USDA will lower the estimates.

Allendale, Inc. unofficially estimated corn production to be 13.9 billion bushels and 2012/13 corn ending stocks would still end about 1.3 billion bushels.