Wheat braces for wild ride
For the past year it has been almost all downhill for wheat prices, but there’s a bit of a reversal this spring.
And given still tight world supplies and weather problems, look for a potential wild ride of price swings until mid summer when production prospects will be clearer.
U.S. wheat futures markets have seen the July contract increase from about $3.50 a bushel in January to $4.28 on Monday.
The rise started with the U.S. Department of Agriculture estimate of reduced winter wheat acreage last fall.
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More recently, flooding and saturated fields in the U.S. Northern Plains and the Canadian Prairies have led to fears of delayed seeding.
Last weekend’s frost in the U.S. Great Plains sent the Chicago market up the limit as traders worried about the effect on emerging winter wheat crops.
France has experienced dry weather for three months and there are fears winter crop yields will be affected.
This information supports the price, but it’s doubtful we’ll see prices soar as they did this time last year.
On Monday, the United Nation’s Food and Agriculture Organization based in Rome released a tentative 1997 forecast of world production of 590 million tonnes of wheat, almost unchanged from last year’s big crop. Overall cereal production was forecast to rise to 1,880 million tonnes from 1,873 million in 1996.
Last week, the International Grains Council forecast wheat production to edge up to 583 million tonnes, up from 579.5 million in 1996.
But it also forecast world demand to rise to 582 million, only one million tonnes less than forecasted production.
That is a narrow margin. Perfect conditions would lead to a second year of slightly rebuilding world stocks but production problems mean a return to the trend through most of the 1990s of declining stocks.
This news seems to rule out a return to the low prices of the early 1990s.
Meanwhile, another factor quite apart from the growing conditions is helping to support livestock and grain prices.
The Canadian dollar has been sliding for some weeks and is now valued in U.S. dollar terms at about 71.6 cents, down about four cents from its peak last November.
Back then, many analysts looked at good corporate profits and low interest rates and predicted the loonie would go to 78 cents or higher.
Now, interest rates are rising, the stock market is in turmoil and the dollar is sliding.
But it’s good news for Canadian agricultural products.
