The possibility exportable supplies could be tight in 2021 has encouraged U.S. prices to reach levels not seen in five years
There’s a lot of wheat, including feed wheat, in the world right now and in fact, we can see near-record levels.
However, if we look at stocks among major exporters, they’re rather snug so, there is the possibility exportable supplies could be tight in 2021.
This depending how the weather will play out.
Russia and U.S. weather conditions, are encouraging high of prices.
But, there is China!
Well, how does China fit into this picture? Half of the wheat in the world is stored in China.
Recently, we have seen a move toward feeding more wheat in China.
In fact, the US Agency raised their wheat feeding estimate for China by several million metric tons in the last report.
In fact, as corn prices have hit record highs, wheat and barley are taking up anywhere from 20% to 30% of hog rations in parts of China.
The Chinese government want to be self-sufficient, so they’ve been pushing more wheat consumption.
Initially, the wheat auctions were rather aggressive, but they have dramatically slowed down in recent weeks, largely because the first wheat auctioned off was in areas more conducive for feeding.
Higher prices have been necessary to pull wheat out of reserves for feeding.
China’s reserve will work lower, but that will take a few years to occur this.
The switching gears on Russian agro politics, and to a lesser degree the Black Sea marketing strategy, predominantly will sets the world wheat price.
Generally, they get rid of all their exportable wheat every year by setting a price to ensure that happens.
But now, the conditions are changed.
Russia government is taking over more of the export infrastructure, so it can control price.
So, we can look only to the crop currently present in the ground.
Moisture could improve into the spring, however, if it is no, Russia could have a short crop, that would reduce their exportable supplies.
The Russia export quota programmed from Feb. 15 to June 30 is pushing prices more and more higer.
Egypt tried to buy wheat ahead of the new system, which means their stocks will be relatively tight going forward.
Those dynamics are allowing U.S. wheat prices to float more and more higher.
Chicago futures are near six-year highs.
But, at those prices, you have to respect sales and marketing.
Can it go higher? Yes. But it can also go lower.
Maybe, prices will hang around waiting to see how the winter plays out.
So, will need another 30 to 45 days.
Only after this period, we’ll can start to have a better picture of how the crop is shaping up in the Black Sea as well as in the Plains and that will set the direction in terms of if the market goes higher or pulls back.
