Winter weather prompts wheat price volatility

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The wheat crop in Kansas is rated 46 percent good and 7 percent excellent, according to the Kansas Ag Statistics January Crop Report, released Jan. 3. Compared to this time last year, this is a dramatic improvement.

But this crop still has a long ways to go.

Grain traders will watch weather very closely. In the short-term, near-record high temperatures and very little precipitation is in the forecast, which is a concern. Still, the crop is in dormancy and timely spring rains and good finishing temperatures will determine yields at harvest.

Current market movement has wheat following directions of corn and soybeans. Much is being made of lack of moisture in Argentina and the effect that has on having on corn and bean production in the southern hemisphere. Last year, the feed grain stocks-to-use ratio tightened, so production shortfalls will cause market uneasiness and volatility. Conversely, the world wheat crop rebounded in production this past year. How much of that wheat will be used as livestock feed will be determined by the futures market relationships between the price of wheat and corn which are currently trading near equal value in Chicago.

The recent trend up in the wheat market has created some opportunities for wheat farmers who missed selling at harvest prices. While there is still potential for market moves higher, picking tops in markets has proved a risky strategy. With the extreme volatility and uncertainties appearing to continue, knowing cost of production and selling at levels that can lock in a profit in increments is one option for farmers in trying to manage risk in these uncertain times.

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