Chicago Board of Trade wheat futures are expected to fall 6.7 percent this year from their 2011 close as plentiful world supplies crimp demand for US wheat on the export market, a Reuters poll found. A drop would be the fourth annual decline in the wheat market in the last five years.
Analysts with a bearish view of the market also said that large plantings of wheat in the United States and plentiful moisture will likely lead to a bumper crop and flood the domestic market with wheat during the second half of the year. "I think we will have big crops," ABN Amro analyst Charlie Sernatinger said.
The front-month CBOT soft red winter wheat contract was expected to end 2012 at $6.09 a bushel, down from the closing price of $6.52-3/4 on December 31, 2011, according to the average estimate in a survey of 11 analysts and traders. "We still think we are in an ample world supply (market)," said Don Roose, analyst with US Commodities. "We think that is going to continue. We are banking on the (idea) that we do not see big production drops."
CBOT wheat prices fell 17.8 percent in 2011 as poor export demand for US wheat weighed on the futures market throughout the year. Russia and other Black Sea countries returned to the market as global suppliers in 2011, one year after a drought decimated their crop production and forced them to impose an export ban. Large investors have placed bearish bets on the wheat market, with speculative funds building up a record net short position on CBOT wheat as of mid-January.
Estimates for the 2012 year-end close ranged from a low of $5.00, which would be the lowest year-end price since 2005, to a high of $8.30 a bushel, which would be the highest price to end a year since 2007. Chris Manns, an analyst for Traders Group Inc, gave the most bullish forecast due to expectations for hot and dry weather this summer hurting crop production and placing a strain on ending stocks. Rich Nelson, an analyst at Allendale Inc who also expects wheat prices to rise in 2012, said his forecast was based on seasonal end-of-year gains.
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