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Wheat sets the tone

Agriculture.com Staff 07/26/2007 @ 2:40pm

The wheat crop is the first crop of the season to be harvested, so the supply/demand situation can really set the tone for the marketing year for corn and soybeans as well.

A long time ago, most analysts expected a bumper world wheat crop after the problems of the previous year. There's a chance the crop will still be bigger, but only slightly. Demand is so robust that world carryout will be down again this year.

The shrinking crop size began in the U.S. with the Easter freeze. Since then, there have been a series of yield-reducing weather events in the United States and other parts of the world. Lately, the wheat crop in eastern Europe has suffered under incredibly hot conditions, while some crops in western Europe, especially France, are too wet. Each nick in the crop size produces anxiety about how the demand for wheat will be satisfied.

It certainly appears wheat buyers have very poor coverage of their needs. Plus the U.S. is the largest supplier of exportable wheat. Still, it was a surprise to the market that this morning's export sales report showed sales of 2.077 million metric tons of wheat. That was much higher than any pre-report guesses. Included in that figure were 602,500 metric tons to "unknown." Wheat prices rallied as much as the 30 cent limit today, but closed off their highs.

The hot weather has also not been kind to the corn crop in Eastern Europe. There are varying estimates of damage, so there will be questions the USDA needs to answer in the upcoming world supply and demand tables. European imports of corn or other feed grains may increase and exports could decrease. While it is difficult for Europe to import U.S. corn, it is not hard to make the assumption that U.S. exports to other destinations may increase, as Europe will not be as large a seller.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The wheat crop is the first crop of the season to be harvested, so the supply/demand situation can really set the tone for the marketing year for corn and soybeans as well.

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