Update from May 14th Commodity Speculation Report for Wheat.

Quoting Bloomberg.com, “wheat fell for the sixth straight session after rain boosted prospects for winter varieties in the southern U.S. Great Plains. “The big news in the wheat business is the great rains,” said Darrell Holaday, the president of Advanced Market Concepts in Manhattan, Kansas. “These are rains we don’t usually see this time of year. It was just perfect.”
According to the Hightower Report last week, July wheat has fallen close to the lows of April, driven down by several factors:
  • The beginning of the winter wheat harvest
  • A bullish crop expectation
  • Anticipated low export demand, fueled by the debt crisis in Europe
  • Favorable weather in the Southern Plains to support the early harvest
Cindy Snyder, writing in Times-News Magic Valley.com , states; “wheat growers and market watchers who were hoping to find a reason for prices to rally in the coming months were disappointed by the latest revision to the world’s grain balance sheet. In the same article, Jon Marcus, a trader with Lakefront Futures and Options said in a press conference call following the release of the May world agricultural supply and demand estimate, “there’s no reason for wheat to go up.”

Further, according to weeklytimesnow.com, coupled with near-record global wheat stocks, Australian farmers face a grim outlook in the immediate future. According to the CBH Group wheat trading manager Chris Brown, “a lack of storage in the Black Sea region meant countries, including Russia, the Ukraine and Kazakhstan, will have to dispose of their wheat straight after harvest. Mr. Brown said cheaper, but inferior quality wheat, would flood Australia's traditional markets. On top of that, a relatively low euro would result in cheap EU wheat hitting Australian markets.”

The market still seems very bearish to this writer. Cheap exports from the old Soviet states means that export demand from both the US and Australia is expected to be considerably less than in the recent past. When you factor in continuing record stocks in both the US and the World and another bumper crop, it is hard to see anything that can take this market back up. Economic uncertainty in Europe will continue to exert downward pressure on an already uncertain market.
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