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It's hot! So wheat's not

Shelly Hagan @shellykhagan
Field of wheat in central Kansas is nearly ready for harvest.
Ricardo Reitmeyer | Getty Images

Can U.S. wheat prices bounce back?

Three years ago prices hit the 700 level, 2 years ago they were in the 600 level and just last year wheat was in the high 500 zone. But in the past 6 months, wheat prices have not risen above 520.

As usual when it comes to crops, the weather is the key factor. And weather models are forecasting higher than average summer temperatures in the coming weeks. WSI meteorologist Dan Leonard says that kind of heat is good for wheat yields.

"Unlike corn and soybeans, wheat does fairly well in hot or dry weather -- assuming there is some occasional rain. Corn and beans, on the other hand, will suffer with a hot dry summer," Leonard said.

With these weather conditions, Leonard advises commodities buyers to invest in corn and wheat spreads or bean and wheat spreads in the hopes of steady wheat prices and rising corn and bean prices.

However, all three crops saw a big fall in price June 20 after a forecast of rain came following a dry period.

Prices for wheat have been especially volatile so far in June. The price of wheat peaked June 9 before falling 11 percent over the last 9 sessions. Commodities trader Scott Shellady advises anyone trading soft commodities to be careful in the short term but in the long term wheat prices will stabilize.

"People need to eat, so there will always be demand, (for wheat). The weaker dollar gives wheat demand a boost because it brings more customers around the world," Shellady said.

One more factor to consider: farmers are getting more bushels per acre than ever due to changing technology and the use of herbicides. But Shellady says this increase in supply has been met by a growing population.