By Joanna Levin
US wheat prices have climbed over the past few days due to a mixture of slightly improved fundamentals and rumours of Government intervention for desperate farmers.
The Argentinean wheat crop could be reduced by dry weather conditions, while both Australia and Russia are likely to have disappointing harvests. There is a lack of moisture in the US hard red winter wheat belt.
However, this is not enough to counteract the oversupply of wheat in the USA and abroad. Last Friday, the US Government released crop estimates showing that American producers will achieve the highest ever yield of 43.3 bushels/acre of spring wheat, an upward revision from the 43.0 bushels/acre yield forecast last month.
Total national wheat production is expected to rise by 2% year on year to 2.56 billion bushels. This comes at a time when export demand is falling and US grain elevators are already overflowing with the winter wheat crop.
Meanwhile, the battle continues over federal aid for wheat farmers, who have seen the value of their crop fall by a third since the start of the year. This week the US Senate again rejected the proposal to raise the value of subsidies, so-called Loan Deficiency Payments. He may however increase the annual payment to wheat farmers under the five-year phase out plan of the old farming policy.
The key question for the market is whether any government intervention will take grain off the market and trigger a rally or encourage farmers to sell quicker, causingprices to fall further.
The Chicago December futures contract settled on Wednesday 16 September at 263.5¢/bushel, down 4.5¢ from Tuesday and up from 260¢ a week ago.