US wheat prices seen falling as global supplies rise
Chicago Board of Trade wheat futures were seen falling nearly 13 percent in 2013 as strong overseas harvests should make up for lagging production in the US Plains, according to a Reuters poll. The front-month Chicago Board of Trade soft red winter wheat contract was expected to end 2013 at $6.80 a bushel, down from the closing price of $7.78 a bushel at the end of 2012, according to the average estimate in a survey of 13 analysts and traders. Estimates ranged from $5.80 to $8.00 a bushel.
Copyright Reuters, 2013
A large spring wheat crop in North Dakota also will bolster supplies and weigh on prices. "Our forecast assumes that conditions will not deteriorate out of the Black Sea or Australia, with supplies boosted by good spring wheat production in Canada and the northern Plains," said Bryce Knorr, senior editor for Farm Futures Magazine.
If realised, the drop in wheat prices would be the fourth decline in the last six years for the commodity. In 2012, CBOT wheat gained 19.2 percent, making it the best performer in the Thomson Reuters-Jefferies CRB index. Food prices are expected to ease along with the agricultural commodities as cheaper wheat will loosen the squeeze on profit margins for livestock and poultry producers.
CBOT wheat already has fallen 19 percent from the 2012 high of $9.47-1/4 reached in July. The front-month contract has lost 1.3 percent so far in 2013. Wheat averaged a 20 percent decline in 2008, 2009 and 2011, the last three years the contract has fallen. The average price of the front-month CBOT wheat contract has been $5.67 a bushel during the past 10 years. The ongoing drought in the US Plains that is raising concerns about hard red winter wheat production will likely support prices throughout the first half of the year.
"Wheat should also be starting a downturn after a peak between March and July on weather concerns," Knorr said. Fully 100 percent of the land area in Kansas, Colorado, Nebraska and Oklahoma remained engulfed in severe drought or worse, according to the Drought Monitor, a report issued by consortium of federal and state climatology experts.