The wheat market has gone crazy this season even though most of the talk was about corn and ethanol demand in the Spring. The strong rally this year has taken wheat prices to levels we have not seen in 35 years. The price of the nearby contract is no higher than what was found during the “great grain robbery” of the early 1970’s. This has happened with little fanfare outside of the commodity industry.
The combination of two events have driven the price o these levels. One, the ending stock levels for world wheat are low. The chart shows levels on the low end but we are not at extremes in the world market as the last report, (August 10). However, the US, the largest wheat exporter is showing numbers which are at extremes, (August29). Note that these numbers are not adjusted for the greater demand. The marginal supplier of wheat, the US, may not have much to export. This alone should drive prices higher, but the combination of weather has made matters worse.
Australia continues to have a drought which caused crop estimates to be revised downward. As another large exporter, a drought with their crop will affect th world market. There will be less grain available. This combination of low inventory and bad weather has forced price up to such high levels.
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