Last week showed what can happen to high prices: they can fall, fast.
That’s why some crop market analysts are suggesting farmers take advantage of Canadian Wheat Board producer pricing options while they still can.
“The daily price contract is something guys really should be considering,” said Alberta Agriculture analyst Charlie Pearson about the CWB program, which ends 7:30 a.m. July 21.
Pro Market Communications analyst Errol Anderson agreed.
“They should lock in some prices here while the going’s good,” said Anderson.
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“It’s possible we’ve seen the peak of the wheat market.”
After an exciting race upward, wheat prices buckled last week following a United States Department of Agriculture supply and demand report that showed world wheat stocks are growing, and rain bathed parts of Iowa and Minnesota.
Analyst Ken Ball of Union Securities said many people were rattled by
USDA’s estimate of a 105 million tonne Chinese wheat crop, which will give that sometime-buyer nation a four to five million tonne surplus.
“They certainly won’t be buying any wheat,” said Ball.
The Ukrainian crop will also likely be larger than expected.
Anderson said recent price spikes in wheat are due to American wheat markets’ focus on local North American crops, but overall world conditions don’t support that price strength.
“Minneapolis is sort of going on its own,” said Anderson about the hard red spring wheat futures contract.
But for three months now the USDA has been edging up its world wheat stocks number, and that will eventually undermine prices.
Steady corn carryout
The market was also surprised by the USDA’s forecast showing no increase in the corn carryout, Anderson said. People expected the USDA to find more corn growing, but increased consumption means that it didn’t increase the carryout.
Ball said that will make the market watch the rest of the season’s weather closely.
“They need a pretty solid crop,” said Ball. “They’ve got one coming, but the weather hasn’t been solid.”
The real story in the USDA report and in the world market, Anderson said, is that world wheat stocks are not dropping, which doesn’t look good for prices.
“World wheat stocks are actually starting to rebound. The market is fixated on the U.S. drought right now, and Australia has problems, but the surprise number was how much Chinese wheat production is expected to rebound,” said Anderson.
“The market seems to be ignoring that.”
