Global Wheat Glut Triggers Market Slide

May 6, 2016 02:58 PM
 
Global Wheat Glut Triggers Market Slide

Worldwide record wheat harvests are triggering a bearish market.

Wheat futures dropped to their lowest point since mid-April under pressure from speculative funds buying back positions, the global glut and weak export demand, according to analysts.

Before the market’s close Friday, CBOT July futures for soft winter wheat slid 55 cents from mid-April prices to $4.63. Soft winter wheat is grown in the eastern corn belt of Illinois, Indiana, Ohio and Kentucky. Kansas City July futures for hard red winter wheat fell 57 cents to $4.52. Hard red winter wheat is grown in the Central Plains.

Only Minneapolis spring wheat, grown in the Dakotas, was trading at a premium of $5.40, according to analysts.

Farmers in Kansas alone are expecting the biggest wheat harvest in 13 years, USDA figures show, even though they planted less, according to estimates by the Kansas Wheat Tour.

In Ukraine, wheat harvests are expected to exceed analyst forecasts by 20% at 24.5 million tons, according to a USDA Kiev attaché cited in a Reuters story. Parched weather in Canada threatening wheat production didn’t stop the market slide.

“We’re down three million acres (in the U.S.), and it’s still a bigger crop,” said DuWayne Bosse of Bolt Marketing in Britton, S.D. “The problem is that there is a lot of wheat grown all over the world,” he observed.

The exception might be Canada, where wheat stocks have dropped to levels not seen since the 1930s.

Before the market’s close Friday, CBOT July futures for soft winter wheat slid 55 cents from mid-April prices to $4.63. Soft winter wheat is grown in the eastern corn belt of Illinois, Indiana, Ohio and Kentucky. Kansas City July futures for hard red winter wheat fell 57 cents to $4.52. Hard red winter wheat is grown in the Central Plains.

Only Minneapolis spring wheat, grown in the Dakotas, was trading at a premium of $5.40, according to analysts.

“There are some disease issues, but with prices so low, farmers plant more, and we have a huge ending stock. With so much supply, it almost takes a couple disasters to take up prices and with supplies that huge, it’s not a one-year fix,” Bosse observed.

Higher yield, thanks partly to favorable weather, is the key to the bigger harvest, according to analysts.

“There is a net increase in wheat production throughout the world,” said Rich Nelson, chief strategist for Allendale. “The big question is will the Ukraine get out of wheat production and put it into corn.”

 

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