Wheat prices rise


Staff writer

The cash price of wheat was so high during the 2007 late summer and fall months that many farmers forward-contracted a portion of their anticipated grain harvest for July delivery. Since then, it has sky-rocketed to unheard-of levels as futures prices continue to advance.

"One could say the wheat market is out of control," said Tom Leffler of Leffler Commodities in Augusta in a recent market analysis.

The price for wheat on the Kansas City Board of Trade took a big jump in October after a rise in July and August. It took another big jump in December and continues to seek higher levels.

Market watchers provide several reasons for this. Perhaps the most basic reason is the fact that the supply is down after bad weather, disease, and other problems worldwide in 2007 resulted in poor harvests.

Ending U.S. stocks on May 31 are expected to be the lowest since 1947-48. World ending stocks are the lowest in 30 years.

Foreign demand remains strong regardless of the price. The USDA reported stronger than expected shipments and sales of wheat through January.

On Jan. 31, 95 percent of the projected sales for the year ending May 1 had already taken place.

One Chicago futures trader explained it this way: "Because wheat is a food grain, you have to have it."

Adding to the demand is the faltering stock market and real estate sector, which causes investors to shore up their portfolios with commodities. Speculators always go where the money is, so they get involved, too.

When the local cooperatives buy forward contracts from farmers, they hedge against losses by selling them through a broker on the board of trade. When the price goes up, they are required to make up the difference.

There have been reports that some elevators no longer are willing to contract with farmers, but managers of the cooperatives in Marion County say they are continuing to buy contracts and expect to come out OK.

According to Stan Utting, manager of Agri-Producers, Inc., Tampa, margins on contracts which were purchased last summer in the $4-5 range have eaten up any potential profit that could have been made on those contracts.

But the cooperative continues to accept contracts from farmers and expects a good year. "We are alive and well here in Tampa," Utting said.

The cash price of new wheat at local cooperatives reached a peak on Feb. 8 before dropping slightly. At Cooperative Grain and Supply in Hillsboro, it closed at $10.34. It reached a new high Tuesday at $10.82.

Dick Tippin said the price changes from minute to minute.

"If production is good overall, the price maybe will come down," he said.

As wheat harvest begins worldwide, prices are expected to moderate, although crop conditions in Texas, Oklahoma, and Kansas are not as good as last year at this time, according to a USDA report.

The USDA projects a seasonal average price of $6.45-$6.85, beating the past record set in 1995-96 at $4.55.