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Wheat: The Hidden Opportunity

With much of the recent grain trade headlines attributed to China and soybeans lately, there is one commodity that is sleeping in the background, which might end up being the grain that needs to truly be watched as we head into 2019: Wheat.

After five years of surplus global wheat production, wheat futures have been the bearish, black sheep of the grain family. “Too much supply, quit growing wheat, wheat has no reason to rally.” These were statements decried by many analysts in the industry. During those five years, wheat prices have been relatively inexpensive, allowing for global demand to grow. And because of that, according to the most recent USDA report:

  • Global wheat use is 745.8 million metric tons. 
  • Global wheat production is 733.51 million metric tons (down from 763 million metric tons just two years ago).
  • Look at that math – the world is now consuming more wheat than we are growing.

For some, you may read this and wonder why wheat prices have not rallied. The answer is because during those five years of global surplus production years, much wheat was put into storage and is accounted as ending stocks. This is globally pegged at 266.71 million metric tons. Even though in the world we will not produce enough grain to satisfy demand, we are able to rely on the ample leftovers still stored around the world. It does set the stage for global weather watching in 2019. If there are production hiccups around the world next year, we’ll need to dip into those wheat reserves pretty quickly. 

Where You Need to Wheat Weather Watch

As you know, wheat is grown around the world. While India and China are the largest consumers of wheat, they, for the most part, are self-sufficient in production. Yet they use nearly every grain they grow and leave nothing for export. So, the places to watch are the countries which pride themselves on exporting wheat: Russia, Ukraine, European Union, Argentina, United States, Canada, and Australia. Australia has suffered wheat loss this year due to drought. Parts of Canada and the United States are said to not have planted wheat in recent weeks due to adverse weather conditions. The world will be watching wheat, and if weather becomes an issue, prices will likely quickly respond.

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results.Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2018 Stewart-Peterson Inc. All rights reserved.

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