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Biggest wheat glut in 8 yrs - may bring prices down 8.6% by July
13 Apr 2010, 0127 hrs ,Bloomberg
CHICAGO: The world will have so much wheat this year that the US farmers could leave every acre unplanted and still have a surplus, a sign of more losses after futures had their worst first quarter in 15 years.
A 34% jump in the combined harvests of Australia and Russia over two years is creating the biggest wheat glut since 2002, even as American growers sow the fewest acres in 39 years and the US Department of Agriculture raises its estimate of world output each month since June. Analysts surveyed expect an 8.6% price drop by July.
Two years after prices doubled, sparking food riots from Haiti to Indonesia, the US, Canada and Russia are battling for export markets. The 14% drop in the first quarter means lower costs for Premier Foods, the UK maker of Hovis breads, and slower growth for grain processors including Archer Daniels Midland.
“It’s a mammoth surplus and we have to get rid of it before prices have any hope of rallying,” said Bill Gary, the president of Commodity Information Systems in Oklahoma City.
Gary, who began trading grain in 1961, predicts $4 a bushel by August, a 17 percent decline. “If we have another financial crisis, which I don’t believe is likely to happen, we could see wheat prices fall to $3.50 a bushel.” Wheat futures for July delivery closed April 9 at $4.7925 in Chicago. Prices will fall to $4.38 by the end of July, according to the average of 15 estimates in a survey last week.
US farmers, the biggest exporters, will see their share of the world market plunge to 19% this year, the lowest in at least five decades, down from 29% in 2008, government data show. Russia will supply 14%, up from 3% in 2004. Australia’s 12% share has almost doubled since drought damage two years ago.
13 Apr 2010, 0127 hrs ,Bloomberg
CHICAGO: The world will have so much wheat this year that the US farmers could leave every acre unplanted and still have a surplus, a sign of more losses after futures had their worst first quarter in 15 years.
A 34% jump in the combined harvests of Australia and Russia over two years is creating the biggest wheat glut since 2002, even as American growers sow the fewest acres in 39 years and the US Department of Agriculture raises its estimate of world output each month since June. Analysts surveyed expect an 8.6% price drop by July.
Two years after prices doubled, sparking food riots from Haiti to Indonesia, the US, Canada and Russia are battling for export markets. The 14% drop in the first quarter means lower costs for Premier Foods, the UK maker of Hovis breads, and slower growth for grain processors including Archer Daniels Midland.
“It’s a mammoth surplus and we have to get rid of it before prices have any hope of rallying,” said Bill Gary, the president of Commodity Information Systems in Oklahoma City.
Gary, who began trading grain in 1961, predicts $4 a bushel by August, a 17 percent decline. “If we have another financial crisis, which I don’t believe is likely to happen, we could see wheat prices fall to $3.50 a bushel.” Wheat futures for July delivery closed April 9 at $4.7925 in Chicago. Prices will fall to $4.38 by the end of July, according to the average of 15 estimates in a survey last week.
US farmers, the biggest exporters, will see their share of the world market plunge to 19% this year, the lowest in at least five decades, down from 29% in 2008, government data show. Russia will supply 14%, up from 3% in 2004. Australia’s 12% share has almost doubled since drought damage two years ago.
