Since Oct. 24, the Kansas City Board of Trade (KCBT) March wheat contract has essentially traded between $5.50 and 6.50/bu. There were 10 trading days in early December when the prices were below $5.50 and bottomed at $5.01. There were three days in early January when the prices were above $6.50 and peaked at $6.70. Since Jan. 12, the trading range has been between $5.75 and 6.25.

The March contract appears to have support at about $5.86 and resistance at $6.25. The KCBT July contract has support at $6.06 and resistance at $6.50. More than likely, the KCBT wheat contracts will not establish a trend until the wheat comes out of dormancy in late February and early March.

The KCBT price charts indicate that both old-crop and new-crop wheat prices have $1 downside risk. If 2009-2010 marketing year wheat stocks are higher than 2008-2009 stocks, wheat prices will decline and the higher the stocks the lower wheat prices. Benchmarks are for 2009 U.S. winter wheat production to be 1.5 billion bushels, total U.S. wheat production to be 2.15 billion bushels and/or world wheat production to be 23.5 billion bushels.

Compared to the five-year average, nearly every production factor was positive for 2008 wheat production. Planted acres were 63.1 million compared to a 59.3 million average. Percent harvested acres were 88.2% compared to 84.5%. And, yield per acre was 44.9 bu., compared to 41.6 bu. In 2009, planted acres are expected to be fewer than 60 million and percent harvested acres and yield closer to the five-year average.

About 4.1 million fewer U.S. winter wheat planted acres, current dry conditions and the fact that the winter wheat crop was planted with relatively high fertilizer prices (less fertilizer applied than normal) all increase the odds that the production factors may be below the averages.

If you have wheat and plan to sell it before harvest, consider selling in equal lots between now and late April. If it does not rain in March and April, wheat prices may increase 50-75¢. If it rains, wheat prices may decline 50¢.

Elevators are offering between 75¢ and $1.10 less than the KCBT July 2009 wheat contract price for June delivered wheat. With a KCBT July wheat contract price of $6.22, the market is offering about $5.37 ($6.22 less the 85¢-under basis) for harvest-delivered wheat. It appears that there is about the same upside June price potential ($1) as downside risk ($1).