World wheat crop conditions and their psychological impact on prices have created a rally that continues today, leaving many growers scratching their heads to why they sold too early and others pondering whether they should keep crops in storage and wait for even more bumps in prices.

After floundering at the $5/bu. level much of the year, Kansas City Board of Trade (KCBT) prices started up in early July when they hit $5.50. They lifted past $6 in mid-July, then wildly elevated to $8 by early August. They have hovered between $7 and $7.50 since then. Predicted short crops in Russia are the main reasons behind the rally, analysts say. Those crop worries were more than enough to offset huge world wheat stocks.

Unfortunately, many growers who sold at the lower prices did so to get bills paid and because there were no projections of any major rallies. Weak basis levels have continued and are part of the reason why others are holding off. Still, $7 futures levels might look pretty good for many down the road, meaning a strong look at 2011 futures sales or forward contracts may be needed.

U.S. wheat export sales continue to be strong in response to the turmoil in the world wheat trade. Cumulative sales reached 480 million bushels through week 12 of the marketing year. Last year it took until week 21 to reach this level of sales and the total so far this season is over 50% of last year’s entire trade, says Mark Welch, Texas A&M University grain marketing economist.

Russia has instituted its ban on grain exports and Ukraine has confirmed it would join in limiting grain exports until the end of the year, he says, and the executive secretary of Kazakhstan’s Agricultural Ministry indicates there is enough grain to meet domestic needs and his country will not impose a grain export ban.

“The wheat basis at the port of Houston is showing signs of improvement as export prospects improve,” says Welch. “Some country elevators are reporting strengthening basis levels, as well.”

He says to look for more planted acres if prices rise. “It would be expected that higher wheat prices this fall would result in more acres planted to wheat for next year,” says Welch. “But there is a downward trend in U.S. wheat planted acres that is a significant factor in planted-acre estimates, as well. For U.S. wheat plantings, these two factors, the downward trend and the previous year’s price explain about 92% of the planted acreage estimate in a given year.”

Welch says that with USDA’s current season average farm price of $5.10/bu. for marketing year 2010-2011, planted acres for 2011 would be expected to be 54.1 million, about the same as 2010. “If farmer’s see higher cash wheat prices, say up to $6/bu., the planted acreage estimate increases to 57 million acres, a 3-million-acre increase.

“Though futures prices have risen dramatically the last few weeks, a weak basis has muted the price response at the local level. Both a lack of confidence that current futures price levels will last and frustration that high futures prices do not necessarily result in concurrent price responses at the local level may limit the planted acreage response to the present rally in wheat prices.”

For soft red winter wheat, Tom Fritz of EG Group LLC says basis along the Ohio River jumped in response to the Gulf market’s market jump last week. That basis eased a bit last Tuesday.