Rising Demand Supports Wheat Market

10:24AM Mar 26, 2020
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The coronavirus is having a ripple effect on commodities since the outbreak hit U.S. shores. 

Grocery stores shelves are in a constant flux. Many bare or picked over as consumers return to eating at home. 

The flour and bread shelves are bare at supermarkets across the U.S. as the domestic demand climbs during the coronavirus pandemic.

“We understand the domestic flour mills are running night and day now trying to catch up with that bread demand,” says Steve Mercer, vice president of communications with U.S. Wheat Associates.

Shelves are expected to remain empty until the virus is under control.

“I do find it interesting that wheat of all of the commodities is what we have most plentiful really around the world. Yet, during this pandemic, it seems that everyone is kind of going for flour, pastas and breads. Those kinds of items feed how the wheat market is going to rally,” says Virginia McGathey, a trader with McGathey Commodities.  

Wheat futures have been trading mostly higher due to export demand as well. That’s as nations are increasing purchases to maintain an inventory of wheat.

“We made a big trade deal, as you know, and China has been buying our agricultural product,” says President Trump during a March 22, 2020 press conference.

The want for wheat is there, even as Russia suspends sales for a couple of weeks. The U.S. Department of Agriculture (USDA) released its weekly export sales Thursday. The Department says net sales of wheat equal 740,000 metric tons for the 2019/2020 marketing year were up noticeably from the previous week. That’s up 73% from the prior 4-week average.

China bought roughly 340,000 metric tons of hard red winter wheat last week. Pro Farmer says that’s the first sale of hard red winter wheat to China since late 2017.

USDA saying in its weekly ratings report that wheat conditions are improving across the southern Plains states. It’s all welcome news for the industry as they hope the buying will continue (even after the pandemic stops).

“China has not made large purchases of any sort compared to what they did before since they implemented their retaliatory tariffs in March 2018,” says Mercer.

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