February 19, 2014


US wheat prices rise on high international demand


With expectations that overseas demand for US grain will be robust this year, wheat for March delivery rose to US$220 per tonne on the Chicago Board of Trade, a five-week high.


The gains in wheat prices were spurred by a government report on February 10 that raised its forecast for US exports by 4.4% from its previous estimate.


Overseas buyers have been clamouring for US wheat after the price fell 22% last year. Wheat exports are already up a third from last year, to 21.6 million tonnes, according to government data.


The higher demand is also expected to shrink US stockpiles of the grain. The USDA lowered its forecast for the amount of wheat left at the end of May to 15.2 million tonnes, down 8.2% from its previous projection.


What could rein in export sales are higher prices for US wheat, analysts said. Globally, wheat stockpiles are adequate, so even a slight price increase could turn buyers of wheat away from the US and toward its competitors, such as Ukraine or Russia, said Darrell Holaday, president of brokerage firm Advanced Market Concepts.


Still, the signs of demand for US wheat and the potential for weather-related crop losses have helped prices recover from a three and a half-year low that was reached on January 29.


Some winter varieties that were planted in the fall and are set for harvest in May and June have been subjected to below-freezing weather for several days at a time, which could lead to plant death, a condition known as winterkill.


After the harvest this year, winter wheat production is projected to be 60 million tonnes, the USDA said in a report. While that number is a preliminary estimate, it may be lower if winterkill cuts yields in parts of Kansas, the biggest US grower of wheat, said Dennis DeLaughter, a Houston-based analyst at commodity brokerage Vantage RM, who recently drove through Kansas inspecting wheat fields.

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