By Joanna Newman
WEAKNESS in soya beans has caused US wheat prices to stagnate in recent days.
After weeks of unseasonably warm weather, there was some price support from forecasts of a cold snap in the midwest, but many analysts argue that the winter wheat crop is unlikely to suffer any lasting damage.
The Chicago March futures contract closed yesterday (17 December) at 276.25¢/bushel, little changed from a week ago.
More than half this years summer wheat crop has been placed in the Loan Deficiency Payment (LDP) programme, a federal subsidy for loss-making farmers. Producers have received an average 29¢/bushel on 1.3 billion bushels of wheat, a total payout of $375million (£223.5m), according to the US Department of Agriculture.
Due to this help with their cashflow, farmers are understandably in no hurry to sell their summer crop on the open market, given that wheat prices are hovering around twenty-year lows. This in turn has created a worrying overhang of unsold inventory in the domestic market.
On the export side, US producers are caught in a Catch-22 situation. Federal aid programmes to countries such as Russia would help alleviate oversupply at home. But giving away wheat helps push down prices in the international market and could do damage in the long term analysts warn.
Traders are pinning their hopes on talk of new wheat tenders by Taiwan and Bangladesh.