While the effects of the drought in Russia with its resultant suspension of exports, and the Ukraine wheat crop hit by drought, are largely unknown for the supply of wheat, that hasn't kept speculators from bidding up wheat prices, as they play on the uncertainty and fears of the worst case scenario of not having enough wheat supply this year, a highly unlikely possibility.
The Ukraine has nodded toward possibly withholding exports as well, helping to fuel more fear into the wheat market. If they do, that would happen from September to December. They should make a decision by August 25.
Another factor is the opposite in Canada, where heavy rains could limit the harvest.
None of this is anything new as far as weather goes, and hyping up the potential consequences weather can have on wheat prices is almost a sport in itself every summer and fall season.
Barclays (NYSE:BCS) analysts said in a research note, "We expect a trend of shifting import demand to U.S. wheat exports in the absence of Black Sea exports."
That remains to be seen, as they're basing that assertion on only one shipment of American wheat to Egypt. But it is a probability.
Wheat prices could soar much higher even if Russia isn't able to plant its winter wheat, as it would extend the shortage through next year, although other countries could respond by increasing the amount of acreage planted to compete for the business.
This is an unlikely scenario if the weather forecasts are accurate, as more than an inch of rain is predicted for the weekend, which would dramatically change the Russian wheat planting picture and allow them to successfully plant the grain.
The December wheat contract closed at $6.8875 a bushel Wednesday, the first upward move in three days.
No comments:
Post a Comment