Global Outlook

Wheat

Contributed by eResearch

By Bob Weir

In our June 28th Clarion, when discussing the outlook for various commodities, I stuck my neck out and said, “For the future, my bet is on wheat, currently depressed because of poor weather affecting the growing season.” That reference was primarily aimed at the extremely wet conditions that prevailed in the westeren Canadian prairie provinces. This was in contrast to generally good crop conditions existing in the USA. However, there was small, but growing, evidence of concerns about global wheat production. The drought in Russia and the eventual wheat export ban from that country beginning mid-August and scheduled to last until the end of the year, has sent wheat futures soaring. Ukraine and Kazakhstan also are experiencing drought conditions. The situation in perennial drought-ridden Western Australia, which typically provides around 40% of Australia’s wheat exports, looks bleak too as insufficient rain is expected to lead to a significant drop in production this year.

Coming up later this week is the latest estimate from the U.S. Department of Agriculture on world wheat demand and supply. A disappointing report will likely lead to another ratchet up in wheat prices.

Higher wheat prices (and other grains, too) have two implications: food prices and agricultural-related stocks will likely go higher.