Prices for Wheat Have Dropped, but the Pressure on Supply Still Remains
Throughout the last few months, the price of wheat hit decade highs but now, it has seen a significant drop in future prices – hitting their lowest point since February, data has shown. It’s not just wheat have has seen prices drop. Corn futures fell as well, while soybeans, soy oil and soymeal futures have risen.
The Reasons for the Price Decline
There have been a few reasons for the decline in prices. Supply Chain Dive notes that weather conditions in the Northern Hemisphere has become more favorable after the hot/dry weather that has had an impact on the planting of spring wheat in North America. “The weather has normalized and the production outlook is improve, additionally, there is the normal seasonal price pressure that comes from the Northern Hemisphere harvest of winter wheat that is underway,” Paul Hughes, Chief Agricultural Economist at S&P Global Commodity Insights, told Supply Chain Dive.
Additionally, Australia – one of the largest exporters of wheat – is expecting to produce a bumper crop, Bloomberg reports. A bumper crop is a crop that has produced an unusually productive harvest, as defined by Merriam-Webster . Which is very encouraging for those stakeholders in the wheat industry. Furthermore, the largest-growing area in Brazil is producing a ton of corn that it’s piling up outside bins.
Demand for Wheat Still Remains
Demand continues to not be ideal, especially on the export side. Jack Scoville, an Analyst with the Price Future Group in Chicago said to Reuters, “Wheat has no friends right now. We are at harvest time and that is weighing on the market… and the demand is just really bad.”
As of now, about 20 percent of wheat produced is fed to animals globally “in a normal year,” stated Hughes. He continued to say that wide price premiums of wheat versus corn have minimized wheat feeding globally, reducing demand.
Kenneth Scott Zuckerberg, Lead Economist of Grain and Farm Supply with CoBank says there are a series of “demand signals” that have occurred in the past few days, back in early July. He told Supply Chain Dive that global shortages of wheat will probably linger for another two crop seasons. There are a few factors that Zuckerberg is watching when making determination on the direction of wheat prices for the last of the year: crop progress in the U.S.; world events occurring; weather; and how acreage is switching between different crops in the U.S.
Looking Forward
As always, if you would like more information regarding this topic, contact our team at InterlogUSA and we will be happy to assist you on any questions or comments you may have! In addition, we have our weekly market updates that can provide you with relevant freight news, updates, developments across the industry, and more.