US wheat oversupplied, overpriced, over there

By Joanna Newman

NORTH American farmers are enjoying excellent – mild and wet – weather for their winter wheat crop.

While this is good news for production, the threat of even greater oversupply come spring is helping to drive down US domestic wheat prices, while in export markets, the US product is uncompetitive.

Just how overpriced American wheat is on world markets was demonstrated by the latest Egyptian tender this weekend. Egypt awarded the contract to France, buying 120,000 tonnes at US$95/tonne (58/t), compared with the USA offering of US variety wheat at US$102/tonne (£62/t).

The Chicago March futures contract closed on Tuesday (3 February) at 270.25¢/bushel, down from 271.0¢ a week earlier and close to its lows of last September. .

Analysts argue that the grain is unlikely to rally as long as soya bean prices remain at their lowest levels in over 10 years. Wheat and beans have traditionally tracked each other in US markets.

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