By Joanna Levin
LIKE corn, US wheat is hitting eight-year lows and analysts are bearish on the prospects for this years crop. Oversupply, favourable weather forecasts and poor demand are all contributing to a collapse in the wheat market.
On the Chicago futures exchange, the September wheat contract settled yesterday (Tuesday) at 247.25/bushel, down 3.5 from Monday and down almost 10 from a week earlier.
Thanks to ideal weather conditions, harvest is well advanced and grain elevators in Kansas and elsewhere are overflowing.
About 91% of the winter wheat crop has been harvested, compared with a five-year average at this time of 86%. An astonishing 14% of the spring wheat crop has been harvested, well ahead of the five-year average of 3%.
Producers hope that a recovery in world prices would help stem further declines. But unless farmers can feed more and plant less, the market looks set to remain depressed into next year.
With world prices currently at an attractive $86/tonne and several countries expected to enter the market soon to buy, this could help support the international market.
There are reports that Jordan and Egypt need to buy wheat, as well as possibly Bangladesh and Iraq. But even if forthcoming orders are placed at close to the $90/tonne level, this would not be enough to stimulate a rally in US domestic wheat prices, according to market analysts.
On the positive side, the market was partially stimulated last week after the USDA announced plans to buy up to 1.5 million tonnes of wheat between now and April 1999 which it will donate to Indonesia.