Wednesday, July 28, 2010

Is Wheat Supply Really Under Pressure?

With the focus on the drought in Russia, and losses of production is some parts of Europe, the impression we're facing a severe shortage of wheat has been put forth by the press, but the reality is there is so much wheat out there, the losses from Russia and Europe are largely irrelevant.

Even with wheat prices continuing to find support and move upward, the reality of the bountiful wheat harvest, which will be realized or focused on in August, will again put downward pressure on wheat prices going forward.

In spite of the surge in wheat prices the last month, expectations are prices will probably end the year lower by about 2 percent over last year.

It's even fortunate the Russian drought has caught the eye of the agriculture press, or wheat prices probably would have been much lower than that.

South America and Australia are particularly strong this year, and wheat exporters will have pressure on margins again as wheat prices begin their inevitable downward march, as global inventories remain strong in spite of drought news coverage.

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