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Wheat Prices Hover Near Harvest Lows, Analyst Says

Technically, wheat continues to languish near the harvesttime lows.

Wheat markets saw choppy price action last week, particularly after the supply/demand report was released when corn and soybeans shot higher, pulling wheat higher as well only to give it all back and then some by the close.

Friday saw the markets regain those losses. Back and forth all week.

Prices are hovering near the harvest lows, unable to get much traction despite increasing problems with Russian exports. Complaints from buyers that low-quality wheat was being delivered has prompted the Russian government to step up inspections. This will slow the exporting process and could stall it if higher quality supplies can’t be found.

Russia also announced last week that it will soon release government wheat stocks into the domestic market to tamp down rapidly rising domestic prices. The country also mentioned in an earlier statement that it would not be buying any wheat this year for government stocks – which obviously would make supplies extremely tight if it has another production issue next year.

This month’s supply/demand report was released last Thursday. Wheat stats were pretty much in line with expectations as USDA lowered Australian and Russian production. World end stocks were reduced by 1 MMT to 260 MMT. USDA increased U.S. production and imports slightly, decreased feed usage slightly, kept exports unchanged, and increased end stocks by 21 million bushels to 956 million.

Stocks are plentiful here in the U.S., and we have good supplies of high-quality wheat, as well. That is not the case for the broader world market. Production problems in major producers of Europe, the Black Sea region, and Australia are cutting into world stocks, particularly among the major exporters.

Our own exports sales last week were a bit disappointing at only 339,000 metric tons. There have been a couple of weeks this marketing year that hinted at increasing business, but we haven’t been able to keep it consistent. I still think it’s just a matter of time for that to happen.

As Russian supplies tighten, especially for milling wheat, buyers will have little choice but to come to the U.S. and/or Canada. Either way, it looks to become a North American sellers’ market as winter comes, and more so into spring.

The wheat market could use an increase in acres here in the U.S. and worldwide. Fall prices haven’t been a huge incentive to bring in more winter wheat acres, nor has the weather. Dry conditions persist in Europe and the Black Sea. Here in the U.S., it’s too wet in parts of the southern and northern Plains, and acres could actually be lower.

We’ll get a better feel for that in the January plantings report. The quest for more wheat acres could fall on spring wheat, but that would be an issue after we see what winter wheat plantings are.

Pressure in the equities market could also affect the wheat market along with the broader commodities space. If stocks see more selling pressure, we could see a wave of selling that affects all markets initially, but the general consensus is usually that commodities and equities will move in opposite directions.

Technically, wheat continues to languish near the harvesttime lows, struggling to maintain upward momentum. At the same time, breaks appear to be well supported. We could well continue in this sideways pattern for awhile, but I think with any indication that Russian exports are slowing, the market will perk up quickly.

Louise Gartner,
Owner, Spectrum Commodities

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