By Joanna Newman
THE market is still digesting last weeks government report that showed the US is heavily oversupplied with wheat.
With stores up 17% year-on-year at 1.9 billion bushels, producers are concerned that the US may be unable to export enough wheat to world markets.
Recent export data points to a 10% drop in export activity compared with a year ago.
Argentina has excellent weather conditions for its wheat crop, which will add to world supplies and increase export competition.
Meanwhile the Brazilian currency devaluation is making Brazils exports cheaper compared with the USA. Analysts argue that American wheat is simply no longer competitive.
Even a drop in the domestic winter wheat acreage to its lowest level since 1972 is not enough to alleviate oversupply.
While producers have pinned their hope on the US Department of Agriculture purchasing wheat for food aid programmes, there are rumours that Russia is reselling its wheat donated by the US government.
Any confirmation would bring the food aid shipments to a halt, exacerbating storage problems at home. Silos are still full from last years summer crop and the winter harvest in the US is fast approaching.
Amid these worries, the Chicago March futures contract closed on Wednesday (20 January) at 270.5¢/bushel, down from 274.25¢ a week ago and its lowest level since last September.