Using Actual Producer Transactions to Determine Producer Market Timing

Abstract

The purpose of this study was to (1) determine how producers' selling decisions correspond with market advisory service recommendations and changes in expected returns, (2) determine how much USDA data underestimates returns to storage, and (3) determine whether a preference for round prices exists in the wheat market and how wheat sales react to price movements around whole dollar amounts. Each objective was evaluated using elevator data from 3 elevators located in the southern, central, and northern regions of western Oklahoma. Regression analysis was used to satisfy objectives (1) and (3). Objective (2) was determined using descriptive statistics and comparing net returns to storage calculated using the elevator data and USDA aggregate data. Results for the first objective show that producers do respond to expected returns to storage. Also, it appears that Oklahoma wheat producers make marketing decisions opposite of those recommended by market advisory services. Results for the second objective indicate that USDA data only slightly underestimate returns to storage. The study also revealed that some producers do seem to be storing their crop longer than is economical. The regression for the third objective found that round number prices are more prevalent in the Oklahoma wheat market than non-round number prices. Furthermore, producers are more likely to sell after prices move beyond a whole dollar amount indicating that they view this movement as a marketing signal.