In early July, wheat was trading at historic highs based on global supply and demand fundamentals. “We have a very short supply from the stocks-to-usage basis globally, and our domestic supply and demand situation is tight,” says Doug Carper, president of DEC Capital. The driving force has been declining crop conditions. In the Northern hemisphere, wheat crops have taken a beating. Crops in the central United States have endured an April freeze and pounding rains that have reduced yields and crops in Europe, Russia and Ukraine have been disappointing. And the Australian crop, which last year suffered devastating drought, while promising, remains an unknown. “What looked like a significant crop across the world has turned into a big disappointment,” Carper says, adding that the highs are in and September wheat could trade between $6.50 and $5.75 per bushel.
“We've still got six times the normal amount of wheat out there in the field in Texas, Oklahoma and Kansas because of heavy rains that have slowed down the harvest this year,” says Jerry Gidel, analyst and broker at North America Risk Management Services. He adds that in addition to the smaller European and Eastern European crops, Canada had dropped acreage in favor of canola for European bio-diesel production. “The rest of the world needs to pick up some wheat and the U.S. is where they do it,” Gidel says. He says wheat will trade between $6.50 and $5.80 in August.
