Oversupply mutes US wheat rally

By Joanna Levin

Wheat prices climbed all last week, but lost some ground yesterday (22 June). The market enjoyed some support from fears of weather damage to the soft red winter wheat crop, as well as stimulus from the strength of maize and soya beans.

However, wheat only rallied by half as much as maize (3.5% v 7%), a sign that a little adverse weather cannot overcome the severe oversupply in the wheat market. Already 18% of the winter wheat crop is harvested, compared with 5% at this time last year and a five-year average of 10%. Yields look likely to be on a par with last year.

The Chicago July futures contract gained 9.75¢/bushel to 289.00¢/bushel during last weeks trading, but lost 2.5¢ on Monday (22 June) to close at 286.50¢/bushel. Mondays retreat was caused by improved weather forecasts for both hard winter wheat and the spring wheat crop.

Many analysts expect production to exceed USDA estimates, and they warn that any further rally in the wheat price could hurt US exports. Nor is there much hope for a jump in domestic consumption, with feed maize in ample supply.