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Don't hold on to $6.00 wheat, analyst says

Agriculture.com Staff 06/22/2007 @ 12:52pm

**Sid Love is a wheat market analyst with Kropf & Love Consulting Services, LLC.

Kansas City hard red winter futures have recently reached highest levels since 1996, when record highs were set.

In April, 1996, Kansas City futures hit $7.44 and in May, 1996, cash hard red winter ( ordinary protein ) averaged $7.03, both record highs. On June 20, 2006, Kansas City JULY futures were $5.865 per bushel and cash ordinary near $6.465.

As prices rise, the cost of carry increases due to interest cost. At these prices and higher, the loan gives little incentive to carry the wheat and you can miss the top in cash markets. Historically, prices at the 1996 highs have not lasted long, as wheat is grown in many countries, much more than corn.

Compare spot bids with deferred bids to see if the market will pay you a carry equal or better than your cost. If not, let someone else carry the wheat.

Check your protein. If you have protein at 12-13 %, or higher, it will be valuable this year, as all the rain lowered average protein content.

The "battle" for acres will be fought between corn and winter wheat into fall planting, so the ratio between wheat and corn is important. The annual ratio of Kansas City cash ordinary wheat and Chicago cash corn was 1.43 in 1996, 1.42 in 1998 and 2.02 in 2006. On June 20, 2007 the ratio was 1.64.

**Sid Love is a wheat market analyst with Kropf & Love Consulting Services, LLC.

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