US Dollar And World Supply Hurting Wheat Prices

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by Chris Lehner of Archer Financial Services

Is wheat oversold? Isn’t it possible El Nino will hurt production in 2016? Will there be a short covering rally? Daily these are questions asked by wheat producers around the world.

Wheat farmers don’t argue about the amount of wheat stored. They are hoping demand will increase with lower prices and production around the globe in 2016 will be hurt someplace besides their own farm. But wheat farmers from Texas straight up to North Dakota know all too well that wheat is stored in record amounts on the farm and off the farm from the 2015 crop and even some left from the 2014 crop.

Not only is there too much wheat stored, the demand for US wheat is falling. The loss of US global sales is fast becoming like a rocket using fuel after it is launched. 

The USDA estimates US total wheat ending stocks are 24.8 million metric tonnes up from a year ago at 20.5 million metric tonnes. At the same time world stocks have grown to 227. 3 MMT when they were 211.7mmt in 2014. With the increase in worldwide supplies and the strength in the US Dollar it has cause a huge disadvantage for US growers.

I was surprised when I read in a recent report how the US has lost sales to countries that have been long time buyer of wheat especially one so close as Mexico. The report showed Mexico is now buying from France, Russia and Ukraine. The report indicated compared to a year ago US exports commitments are down 27 percent. With US production growing almost 21 percent in the past year, a loss of market share to Mexico puts close to 6.7 million metric tonnes on to what will need to be used in the US or sold now the last month of 2015 and into 2016.

Countries such as Nigeria, once the top buyer of US Wheat are shopping in Russia and EU countries. US commitments are down 38 percent and with the move up in the US Dollar compared to the Euro or Ruble, it is doubtful Nigeria will return anytime soon for US wheat.

 

CLICK HERE to read the full article

 

 

Source:  Inside Futures

 

 

Wheat by jayneandd, on Flickr
Creative Commons Creative Commons Attribution 2.0 Generic License   by  jayneandd 

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