It’s too early to get excited about problems down under, says an American wheat market analyst.
The present squall of news reports about El Nino and other crop threats is just a typhoon in a teapot.
“You hear a lot about these things. Then they go away,” said Mike Krueger of the Fargo, North Dakota advisory service The Money Farm.
“It’s too early for the market to start trading that sort of stuff.”
Strong evidence that an El Nino weather event is beginning to occur in the south Pacific grabbed much coverage recently and began to rattle farmers in Montana and other dry areas of North America.
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But it also drew speculation that big problems could occur in the southern hemisphere, where the El Nino effect is greater. That would set the world up for a big bull market in wheat next year.
Krueger expects the opposite to occur. This year’s small wheat crops, which led to an impressive spring rally and still relatively strong prices, will provoke farmers around the world to grow bigger crops next year.
“The chances of getting such a small crop again are slim,” said Krueger, predicting that 2007-08 world wheat prices will be weaker than today’s.
But he said the outlook for the 2006-07 crop is still good. Recent weakness in the wheat market compared to the earlier rally probably won’t last.
“There are just too many problems in Argentina and Australia,” said Krueger.
Hot, dry weather has struck the two southern wheat powerhouses at crucial times in crop development.
Krueger said farmers will probably have a good shot at better wheat prices this winter, but shouldn’t get too confident about big wheat prices later in 2007.
“Next year I expect to see it get weaker,” Krueger said.
