January 17 – Are Winter Wheat Prices Setting Up For Another Summer Spike?

U.S. Drought Monitor says that 57% of the U.S. is experiencing dryness. As we’ve noted throughout this winter, the lack of moisture hasn’t been a friend of the winter wheat crop.

U.S. Drought Monitor says that 57% of the U.S. is experiencing dryness. As we’ve noted throughout this winter, the lack of moisture hasn’t been a friend of the winter wheat crop. But is the lack of moisture a friend to winter wheat prices?

The Polar Vortex likely had a negative impact on the crop size and production. But we’re not going to know the full impact for at least another month. When there’s not much certainty, that’s the time when we hear some bold calls.

Kevin Duling at KD Investors projects a big price bump for wheat.

Duling notes that we are seeing basis prices that we haven’t seen in years, especially for high-protein wheat. In addition, he notes a production cut in the Australian wheat market, and a “minimal” amount of wheat in farmer hands.

Duling argues that factors are coming together to create a bullish scenario, He anticipates stronger U.S. exports and tighter export stocks. He also expects the USDA  May to potentially overshoot on production and demand, and then readjust in June. If crop conditions around the globe weaken, he argues that we could see a similar uptick in price like we did in June 2017.

In chatting with FarmLead President and CEO Brennan Turner, the odds are against this scenario. It’s a compelling argument… one with a probability that we’ll peg at 30%.

The reason is there’s more to this than just an issue surrounding trade.

First we want to factor in what we just learned last week in the WASDE report. There are still a lot of acres to take into account. Winter wheat acreage went up, not down.

More importantly, there is a currency component that must be factored into the equation.

Any uptick in exports that Duling suggests is conditional on shifts between the US dollar and the Russian currency.

The Black Sea is awash in wheat, and buyers have been swinging heavily in their direction for ample, cheaper, more proximate supply.

Tack that on with the significant supply of wheat and comparables around the globe, and the substitution effect may be overlooked. There certainly is a compelling reason for hope in the local markets, especially on high-protein wheat.

But farmers would be better off posting their Grain on FarmLead to attract more buyers in a tight market than simply taking what the elevators will give to them.


Analyst: Wheat Producers Will See June Price Spike

According to the latest U.S. Drought Monitor, 57 percent of the country is experiencing some form of drought or dryness, and much of that is in the Wheat Belt.

Basis for higher protein wheat is at levels that haven’t been experienced in years, according to Kevin Duling of KD Investors.

“The amount of wheat in farmer hands is minimal, so that’s a big deal,” he told AgDay host Clinton Griffiths. “If we do get something going, you’re not going to have that pressure.”

Last week, the Australian Bureau of Statistics (ABS) sliced it’s wheat production estimate for the 2016/17 marketing year by 5 million metric tons. Duling thinks that hole in supply might make room for more U.S. wheat demand.

“We’ll see much improved exports in the next six months—more of a back-loaded market,” he said. “This market has all the signs of doing something good.”

He’s expecting a spark in the market, with both demand and how USDA uses their information in the spring.

H/T: AgWeb
About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.