Wheat prices have soared recently on the hyped-up drought story in Russia, which while real, when compared with the global wheat market, wasn't as big a story as was led to believe, or as big a risk.
As the media catch up with the reality of the global wheat market, and quit their narrow focus on Russia, the supply of wheat is much stronger than when the price went up to over $13 a bushel in the early part of 2008, which ended with food riots around the world.
That is less likely to happen this time around, as stockpiles today are roughly 50 percent higher than they were during the early 2008 period. They are also approximately 30 percent of the average annual global consumption, offering a wider range of protection than in the past.
Of course these times of fear and emotion-driven data are perfect for those looking to move in and out of the market and make quick and predictable profits.
But I think it's going to settle down now that emotions are settling down and the overall supply picture is being looked at.
Many countries have increased their wheat acreage, not only in response to the 2008 crisis, but before that as well, understanding the potential risks associated with weather and grains.
This doesn't take away from the possibility of food inflation related to the increase in wheat, as it still must pass through system, and those costs will be locked in for the most part, and that will cause prices of bakery goods and cereal to rise at some point.
That isn't to say other events couldn't arise that could cause wheat prices to go up, but as it stands today, global supplies are ample, and we'll see wheat prices continue to fall, unless a different set of factors become part of the equation.
Showing posts with label Wheat Production. Show all posts
Showing posts with label Wheat Production. Show all posts
Friday, August 6, 2010
Wednesday, August 4, 2010
What Deflation? Wheat Leading Food Inflation
It's strange to hear the deflation advocates continue their mantra of lower prices while food prices have hit their highest levels in the United States in 26 years in March, and wheat continues to soar in price.
September futures for wheat hit $7.11 on Wednesday, a huge jump of 58 percent from June.
For now wheat is a problem, but it's doubtful that will continue, as countries around the world have increased wheat plantings for several years, and it's more the drought news coverage of Russia and Eastern Europe which is driving wheat prices, more than the actual supply available.
Even so, food inflation is a major threat, and that, probably more than any other element, can lead to social unrest and riots.
Businesses have said the rising inputs associated with their products will be passed on to consumers. And if foolish governments attempt the price control thing, it'll get worse, as enormous shortages will occur, making it even more volatile.
Major foods like meat, dairy and grain is expected to rise higher in price over the next decade, according to the Organization for Economic Cooperation and Development.
Another unknown is how the supply and demand factor will change as consumers in emerging markets increase their meat consumption, which increases demand not only for meat products, but grains used to feed the livestock.
Of larger emerging market countries, India is facing some of the larger inflation problems, with an annualized rate of 10.55 percent as of June.
People can play all the games with numbers they want, and change the definition or parameters of deflation, but inflation will be the problem going forward, and people need to make decisions based on that.
September futures for wheat hit $7.11 on Wednesday, a huge jump of 58 percent from June.
For now wheat is a problem, but it's doubtful that will continue, as countries around the world have increased wheat plantings for several years, and it's more the drought news coverage of Russia and Eastern Europe which is driving wheat prices, more than the actual supply available.
Even so, food inflation is a major threat, and that, probably more than any other element, can lead to social unrest and riots.
Businesses have said the rising inputs associated with their products will be passed on to consumers. And if foolish governments attempt the price control thing, it'll get worse, as enormous shortages will occur, making it even more volatile.
Major foods like meat, dairy and grain is expected to rise higher in price over the next decade, according to the Organization for Economic Cooperation and Development.
Another unknown is how the supply and demand factor will change as consumers in emerging markets increase their meat consumption, which increases demand not only for meat products, but grains used to feed the livestock.
Of larger emerging market countries, India is facing some of the larger inflation problems, with an annualized rate of 10.55 percent as of June.
People can play all the games with numbers they want, and change the definition or parameters of deflation, but inflation will be the problem going forward, and people need to make decisions based on that.
Tuesday, March 2, 2010
Wheat Futures Prices Fall
Wheat Futures and Wheat Inventories
I've been watching this story unfold for the last couple of years, and it's no surprise that so many wheat farmers have plunged into planting more wheat acreage after the great prices in 2008.
The problem is it was those who had wheat in the fields that year which prospered, not the followers you predictably followed up with large plantings which were assuredly going to drive wheat prices down; and they have.
Again wheat prices fell, as the U.S. dollar increased in value, making export demands fall in the U.S.
The drop of 14.75 cents a bushel to $5.045 on the Chicago Board of Trade was the worst since February 3, and there's really nothing in the fundamentals which will change this for wheat or wheat farmers; or wheat investors for that matter, as couple that with strong wheat inventories around the world and there's little out there that could change this situation.
Farmers need to grow something else if they want to generate profits, not follow the herd the year after great prices were attained.
Wheat Futures and Wheat Inventories
I've been watching this story unfold for the last couple of years, and it's no surprise that so many wheat farmers have plunged into planting more wheat acreage after the great prices in 2008.
The problem is it was those who had wheat in the fields that year which prospered, not the followers you predictably followed up with large plantings which were assuredly going to drive wheat prices down; and they have.
Again wheat prices fell, as the U.S. dollar increased in value, making export demands fall in the U.S.
The drop of 14.75 cents a bushel to $5.045 on the Chicago Board of Trade was the worst since February 3, and there's really nothing in the fundamentals which will change this for wheat or wheat farmers; or wheat investors for that matter, as couple that with strong wheat inventories around the world and there's little out there that could change this situation.
Farmers need to grow something else if they want to generate profits, not follow the herd the year after great prices were attained.
Wheat Futures and Wheat Inventories
Monday, December 14, 2009
Agriculture Commodities Prices Going Up in 2010
It looks like 2010 could be a good year for agricultural commodities investors, especially those hitting it right for those food prices going up. Soybeans seems to be one of those agricultural commodities sure to rise in price in 2010, based on nothing more than continued demand from China. That's enough of a reason to believe soybean prices will continue to rise.
Another factor many are considering is in reference to a number of funds possibly having a lot of interest in the agricultural commodity sector in 2010, making it highly likely for many food prices to increase. While that's a real factor, it's not as important as what these funds are making their determinations by.
If there is a real growing demand for a number of agricultural products, then there will be a corresponding increase in prices. But to base a strategy on attempting to invest along with big funds in the sector is a risk. We should always look at the long term factor and not short term ones. Even so, it's not a certainty, and only a guess that the big funds will go this route. It's a gamble at best to follow as if that's going to be the reality.
Sugar continues its rise in price, and that could definitely be a long term trend based on the growing middle classes in China and India. Usually a growing middle class likes to spend money on sweets and things like that when they have the money to. And that should be the case in these countries, as demand for sugar rises along with sugar prices.
Based on the foolish ethanol policies of the U.S., it is expected that demand for corn will continue to rise, along with corn prices. Wheat prices probably won't fare near as well for some time, as countries continue to over-plant and over-harvest, creating downward pressures on wheat prices, which don't look like they're going to abate any time soon.
Another factor many are considering is in reference to a number of funds possibly having a lot of interest in the agricultural commodity sector in 2010, making it highly likely for many food prices to increase. While that's a real factor, it's not as important as what these funds are making their determinations by.
If there is a real growing demand for a number of agricultural products, then there will be a corresponding increase in prices. But to base a strategy on attempting to invest along with big funds in the sector is a risk. We should always look at the long term factor and not short term ones. Even so, it's not a certainty, and only a guess that the big funds will go this route. It's a gamble at best to follow as if that's going to be the reality.
Sugar continues its rise in price, and that could definitely be a long term trend based on the growing middle classes in China and India. Usually a growing middle class likes to spend money on sweets and things like that when they have the money to. And that should be the case in these countries, as demand for sugar rises along with sugar prices.
Based on the foolish ethanol policies of the U.S., it is expected that demand for corn will continue to rise, along with corn prices. Wheat prices probably won't fare near as well for some time, as countries continue to over-plant and over-harvest, creating downward pressures on wheat prices, which don't look like they're going to abate any time soon.
Sunday, January 25, 2009
Commodities: Drought Devastating Argentine Wheat
Argentina, another country that relies heavily on commodities to succeed, has been devasted by a drought which has crushed their wheat market. It is also decimating their cattle which rely on the grain for food.
This is the worst year for lack of rain since 1971, said one Argentine meteorologist. As usual, competing national weather forecasts make the situation unpredictable, as they contradict whether rain will come or not, and whether the drought will continue.
While some farmers in the U.S. were eyeing the situation with interest, hoping to get their wheat out of storage and make some money on it. That may not be though, as even if Brazil buys some wheat from the U.S. because of Argentine companies not being able to provide it, the cancellation of Nigerian imports of American wheat makes it difficult to see any value to wheat farmers in the U.S. It'll keep prices from rising in any significant way. Wheat futures fell when the Nigerian cancellation became public.
A continuing steady diet of bad weather could make a dire situation for agriculture in Argentina even worse, as they're already projecting losses of $5 billion in the overall sector for this year alone.
Other commodities being decimated are soy, corn and beef. Many cattle are dying for lack of food, as farmers do everything they can to keep them alive. Even if they succeed, breeding will be difficult because of lack of nutrition to the animals.
In many places the wheat storage bins are empty, and farmers have nothing but the cows to fight to keep alive.
The news out of Argentina is the wheat harvest could plunge by 44 percent for the 2008-2009 wheat season, while corn is projected to suffer a 27 percent drop, and soy, which is more resilient, is in the best shape in Argentina, looking for a 7 percent increase.
Because wheat in storage has been dwindling, and cattle dying of starvation, the government has temporarily suspended the minimum weight for slaughtering livestock so farmers can sell their livestock before they die.
On the assumption wheat from the U.S. may be imported by Brazil, prices increased some on Friday, but soy and corn prices were volatile, even though the numbers will fall significantly from earlier estimates from Argentina.
This news is grim for the country, as the entire agriculture sector is suffering, and so the nation. With wheat storage bins empty, as well as soy and corn underperforming, it's going to be a tough year for Argentina, as it struggles just to stay afloat.
While other commodities have been surging lately, many grains will struggle to maintain prices, especially wheat, as the dry weather in Argentina continues.
This is the worst year for lack of rain since 1971, said one Argentine meteorologist. As usual, competing national weather forecasts make the situation unpredictable, as they contradict whether rain will come or not, and whether the drought will continue.
While some farmers in the U.S. were eyeing the situation with interest, hoping to get their wheat out of storage and make some money on it. That may not be though, as even if Brazil buys some wheat from the U.S. because of Argentine companies not being able to provide it, the cancellation of Nigerian imports of American wheat makes it difficult to see any value to wheat farmers in the U.S. It'll keep prices from rising in any significant way. Wheat futures fell when the Nigerian cancellation became public.
A continuing steady diet of bad weather could make a dire situation for agriculture in Argentina even worse, as they're already projecting losses of $5 billion in the overall sector for this year alone.
Other commodities being decimated are soy, corn and beef. Many cattle are dying for lack of food, as farmers do everything they can to keep them alive. Even if they succeed, breeding will be difficult because of lack of nutrition to the animals.
In many places the wheat storage bins are empty, and farmers have nothing but the cows to fight to keep alive.
The news out of Argentina is the wheat harvest could plunge by 44 percent for the 2008-2009 wheat season, while corn is projected to suffer a 27 percent drop, and soy, which is more resilient, is in the best shape in Argentina, looking for a 7 percent increase.
Because wheat in storage has been dwindling, and cattle dying of starvation, the government has temporarily suspended the minimum weight for slaughtering livestock so farmers can sell their livestock before they die.
On the assumption wheat from the U.S. may be imported by Brazil, prices increased some on Friday, but soy and corn prices were volatile, even though the numbers will fall significantly from earlier estimates from Argentina.
This news is grim for the country, as the entire agriculture sector is suffering, and so the nation. With wheat storage bins empty, as well as soy and corn underperforming, it's going to be a tough year for Argentina, as it struggles just to stay afloat.
While other commodities have been surging lately, many grains will struggle to maintain prices, especially wheat, as the dry weather in Argentina continues.
Wednesday, November 5, 2008
Commodities: Wheat Prices Drop Three-week Low
Wheat prices fall as commodity grain production increases
Wheat for December delivery dropped to $5.372 a bushel today on the Chicago Board of Trade, as global production has increased significantly, and India announced it would be offering 2 million tons of wheat to its neighbors, putting more downward pressure on the worldwide market. That's the lowest price level in three weeks.
The U.S. Department of Agriculture report on export sales data is expected to confirm these facts, and wheat could fall even more.
Wheat exports for the week ending October 30 are down a huge 40 percent from the week ending October 23, falling to 13.2 million bushels.
Global wheat production is projected to grow 12 percent through June to 683 million metric tons or 25.1 billion bushels.
A little hope has emerged as dry weather in Argentina may help keep wheat prices from falling too much.
But even with some of the drought conditions in China putting a little pressure on wheat commodity prices and wheat futures, it won't be enough to push wheat prices any higher as there was so much wheat produced and on the market this year, that even dry weather and drought conditions hasn't been enough to push commodity grain prices up, including corn futures, soybean futures, and wheat futures.
Commodity traders will have to look at some of the base metal futures and the oil contango for not only a haven for their money, but a place to make some money in the commodity and overall market in 2009.
Wheat for December delivery dropped to $5.372 a bushel today on the Chicago Board of Trade, as global production has increased significantly, and India announced it would be offering 2 million tons of wheat to its neighbors, putting more downward pressure on the worldwide market. That's the lowest price level in three weeks.
The U.S. Department of Agriculture report on export sales data is expected to confirm these facts, and wheat could fall even more.
Wheat exports for the week ending October 30 are down a huge 40 percent from the week ending October 23, falling to 13.2 million bushels.
Global wheat production is projected to grow 12 percent through June to 683 million metric tons or 25.1 billion bushels.
A little hope has emerged as dry weather in Argentina may help keep wheat prices from falling too much.
But even with some of the drought conditions in China putting a little pressure on wheat commodity prices and wheat futures, it won't be enough to push wheat prices any higher as there was so much wheat produced and on the market this year, that even dry weather and drought conditions hasn't been enough to push commodity grain prices up, including corn futures, soybean futures, and wheat futures.
Commodity traders will have to look at some of the base metal futures and the oil contango for not only a haven for their money, but a place to make some money in the commodity and overall market in 2009.
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