Good weather bodes ill for US wheat stocks

By Joanna Newman

THIS has been a volatile week for the US wheat market, thanks to the weather.

Now is the time of year when wheat values are most vulnerable to the weather, as farmers in the south assess the yields of their winter wheat and start to plan for harvest, while further north planting of spring wheat starts.

In good weather the winter wheat crop is ripening extremely well. An unusually high 73% of the crop is rated good to excellent in the latest US Department of Agriculture progress report, up from 69% the previous week.

Meanwhile the weather has also smiled on spring wheat farmers, who have managed to plant 42% of their crop, compared with a five-year norm of 30%.

The USA is already burdened with high wheat stocks and the nations overflowing storage facilities will create a logistical headache when winter harvest commences.

Analysts warn that US wheat prices will have to drop to compete with maize as a domestic livestock feedgrain in order to shift inventory.

Most global markets offer little hope for exports of US wheat and the market will have to adjust downwards to secure more export business in the fiercely competitive international arena.

On a brighter note, the recent easing of trade sanctions against Sudan, Libya and Iran should help US export prospects for wheat.

News that sanctions will be lifted helped boost US wheat prices last week, before the market retreated again because of the beneficial weather conditions at home.

The Chicago May futures contract climbed from 249.5¢/bushel on 27 April to touch 260.0¢/bushel, then dropped to 252.75¢ on Tuesday (4 May).