By Joanna Levin
AFTER hitting 21-year lows at the start of last week, wheat prices managed to inch up slightly towards the end of the week. Analysts report that sentiment improved because of the rebound in the volatile US stock-market, and the strength in the maize market.
The Chicago December futures contract closed on Friday 4 September at 261.75¢/bushel, up 2.25¢/bushel from the previous day after touching a low of just over 250¢/bushel on Tuesday 1 September.
Prices have tumbled from around 375¢/bushel in March due to severe oversupply, while poor export demand and good weather conditions for US farmers have not helped. Already 89% of spring wheat has been harvested, compared with only 65% this time last year and a five-year average of 56%.
The US Government is offering subsidies in the form of Loan Deficiency Payments (LDPs) to encourage farmers to sell their spring crop, to lighten the overhang in the market.
The LDP programme is intended to cover the difference between farmers break-even needed to repay their loans and the actual market price. In fact, cash wheat prices are currently at or above farmers average loan values.
Nevertheless, the Government is offering LDPs on top of todays cash prices to help bring the spring crop to market. With the flood of product reaching the market, prices will remain under pressure and many see the rally of the past few days short-lived.