Why Wheat Prices Could Be Headed Lower

February 10, 2016 06:46 AM
Why Wheat Prices Could Be Headed Lower

All grain marketing eyes were on the Feb. 9 World Agricultural Supply and Demand Estimates (WASDE) reports from USDA, and those hoping for higher wheat prices aren't getting the supply and demand scenario they wanted.

On the supply side, global stocks ended up 6.8 million tons to a record 238.9 million tons. In the U.S., ending stocks are the highest they have been since 2009/10. On the demand side, China and India – both huge wheat consumers – both called for lower-than-expected consumption.

The supply-and-demand situation alone could be concern for wheat prices this spring. But other factors could also come into play, as Kevin McNew with Grain Hedge explains.

“If you look at the daily wheat chart on March, we are down at the lows we set back in December,” he says. “I’m worried that we’re going to keep going lower as we get into the tail end of winter and into spring. Historically, when we come out of [an El Niño and it transitions toward] a La Niña year like this year, we tend to have really good wheat yields because we have a wet spring.”

McNew says he is worried about sluggish exports due to continued competition problems spurred along by a strong dollar and compounded by favorable spring conditions that could set up a big U.S. crop.

For all of AgWeb’s coverage of the Feb. 9, 2016, WASDE reports, go to www.agweb.com/article/complete-coverage-of-feb-9-usda-reports-naa-agwebcom-editors/.

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