Wheat prices continued to slide Thursday, following a sharp decline triggered by a USDA Crop Progress report earlier this week that showed the grain advancing ahead of expectations.
The USDA report released Tuesday put 59% of U.S. winter wheat in good to excellent condition, beating the trade’s estimates of 57.6%. By late Thursday morning, wheat prices were trading 4 cents down from the previous day.
Analysts projected bearish wheat markets, pointing to a global wheat surplus and carryover from last year’s crop.
“Global wheat is burdensome, so it’s going to take a couple weather events around the world, in particular Europe to dramatically change price. We don’t account for enough of the world market to make much of an impact even with this dramatic of a cut in acres to really drive prices,” observed Andrew Shissler, partner at S&W Trading in Downers Grove, Ill. Hard wheat could gain on soft wheat over time, he added.
Other factors holding back wheat prices include the lack of demand and a strong dollar, according to analysts.
“The problem with wheat is the amount of ending stocks that represent 46% to 47% of one year’s production,” explained Ted Seifried of Zaner Ag Hedge in Chicago. “You could lose half of the wheat crop and still have wheat. It’s very difficult to find strength (in the wheat market).”
In contrast, soybeans have a carryover of 11.5% to 12 percent, while corn has carryover of 13%, according to Seifried.
Only a sharply lower dollar or major crop loss in a big wheat-producing country could push up wheat prices right now, according to Seifried, who says even a “moderate” weather problem would likely not lift wheat prices.
Tuesday’s Crop Progress report did not spark weather concerns, either, which contributed to downward market pressure.
“It will go sideways for some time,” Seifried predicts.
So what can farmers do? Many growers have already made the right move by planting fewer wheat acres, but when it comes to their hedging strategies, they “still have to do what makes sense in case it were to get worse,” and in marketing, “keep an eye out for the long-term scenario,” Seifried said.
Over time, though, the ongoing reduction in acres could relieve the surplus and eventually take pressure off prices, according to Shissler.
“It’s mostly going to have an effect on long-term wheat,” he says of the drop in spring wheat plantings revealed in USDA’s March 31 plantings report. “That’s a very big reduction in acres that will eventually let prices rise some next year.”