By Joanna Levin
AFTER a sharp fall early last week, wheat prices soared to their highest level since mid-July on Monday 5 October. The Chicago December futures contract dipped to 270.0¢/bushel on Wednesday 30 September, climbed to 286.5¢/lb on Monday before inching off on Tuesday, 6 October.
US traders were reacting to news that freeze damage to the Australian crop will sharply cut supply, which could indirectly improve US wheat exports. However, the US wheat rally has been dampened by volatility in the financial markets which is making futures traders jittery.
Meanwhile, domestic weather conditions are set to improve for farmers to plant their winter wheat. Currently, farmers are behind with only 33% of their crop in the ground. This compares with 39% at this time in 1997.
There was little market reaction to the latest national stocks report, which shows a 15% annual increase in all wheat stocks on 1 September 1998 to 2.4 billion bushels. Farm aid policies in the form of so-called Loan Deficiency Payments have made it more economically viable for farmers to hold on to their grain inventory, instead of selling at unattractive prices. This has helped create an overhang of supply in the market.