Global Supply, Strong Dollar Cause Wheat Acres to Decline (VIDEO)

January 14, 2016 01:30 PM

It has been an eventful week for wheat.

On Tuesday, USDA said that growers will plant almost three million fewer acres of wheat than analysts projected. The strong dollar and an abundance of wheat in the global market have caused prices to plummet and export markets to soften, leading to farmers to pull away from the crop.

Dustin Johnston of AgYield said supply is simply outpacing demand in the wheat market.  

“Wheat is one of those markets that traditionally has a high cost of carry, so investors tend to stay out of it,” he said on AgDay with Clinton Griffiths. “U.S. carryout over the last few years has been growing substantially.”

According to Johnston, this isn’t only happening in America. "Everyone around the world is looking at supply gluts right now,” he said.

Many growers are responding by planting wheat varieties with domestic demand, which Johnston thinks makes sense.

“We have a disadvantage of the strong currency,” he said. “So naturally we should be reducing our acres and planting something where we can count on local demand.”

Johnston said there is potential for upside in the market, but it depends on significant weather events in the spring. “It’s too soon to say if there will be weather problems,” he said.

Watch the full interview below:

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