NEGOTIATOR’S TAKE: Wheat prices at 10-year lows are exerting downward pricing pressure on bakery products and animal feed.
Wheat futures plunged to fresh ten-year lows, on heavy world supplies and the stronger dollar.
“We continue to see a large supply of wheat in the world,” Jason Roose, at US Commodities, told Agrimoney.
“The dollar is trading stronger which is weakening our trade,” Mr Roose noted.
The dollar turned higher on Friday, after Janet Yellen, chair of the Federal Reserve, suggested that there could be two hikes in interest rates before the end of the year. The stronger dollar makes U.S. wheat less competitive on a world export market that is already glutted, particularly due to heavy supplies from Russia.
Feed wheat glut
Despite heavy wheat supplies, wheat quality is unlikely to be stellar this year, with some concerns about protein levels in Russia, following the small harvest in Europe. This could mean more feed wheat around, weighing on soft red wheat prices in Chicago.
Hard red winter wheat in Kansas City, which was trading at a discount to Chicago soft red wheat as early as the start of this week, is now at its biggest premium in 11 weeks.
But Mr. Roose stressed that these recent lows have been a long time coming.
“The problem didn’t start today,” Mr. Roose said, noting the long term drive to wheat self-sufficiency around the world.
“As we continue to see a burdensome supply, it is very hard for these markets to go up,” Mr Roose said.
Egypt, the world’s top wheat buyer, purchased 180,000 tonnes of Russian wheat in a tender. Russian wheat offers were lower priced than in the previous tender, held on Tuesday, when Gasc, the Egyptian state grain buyer, cancelled the tender without explanations. The wheat was purchased at an average price of $185.52 a tonne cost and freight. Daewoo sold Russian wheat for $178.45 a tonne excluding freight, having offered at $179.61 a tonne on Tuesday.
ARTICLE AUTHOR: William Clarke