Reports of trouble on the Great Plains served as a leavening agent for wheat prices this week, sending the market to new monthly highs.
Oklahoma and Kansas are both major wheat-producing states and their hard red winter wheat crop is suffering from too-dry conditions, which make the crop especially susceptible to the cold temperatures that hammered the states recently. This may result in a lower-quality crop this spring when winter wheat emerges from dormancy across the Midwest.
Hard red winter wheat, traded in Kansas City, fell to a 10-year low in 2016, which makes it the dark-horse favorite among commodity traders for a big move in 2017 if weather conditions worsen.
Meanwhile, soybean prices have been tumbling. Soybeans were one of the few agricultural commodities to climb in 2016, which has encouraged many Midwestern farmers to increase soybean acreage this upcoming spring.
Thanks to the futures markets, they were able to lock in profitable prices for the upcoming crop, which allowed them to confidently commit to planting more beans instead of corn and wheat. However, this projected increase in acreage and farmer pre-selling on the futures markets has already driven prices to a two-month low.
While prices near $10 per bushel are still profitable for most producers, there is concern that prices could fall further if even more acres are committed to soy. One prominent analyst is expecting prices to drop below $7, a ruinous price if his prognosis comes true.