Wheat

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5th Jan '09 by rpcroft

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A forum to discuss wheat supply / demand, and price expectations

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Rpcroft

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2 comments

rpcroft

5th Jan '09

2008 saw a recovery of world wheat stocks from 30 year lows. There were less crop failures and a greater planted area.

What will 2009 bring?

Prices have dropped substantially and there is thus less incentive to plant marginal land. There may be a return of record high temperatures after the haitus in global warming observed in 2008 (Chaiten eruption?, La Nina?), this would increase the likelihood of crop failures.

The dark spectre of UG99 looms ever closer over the Punjab and seems to be winning the race against the scientists. Will we see it appear in the Punjab in 2009?

hugoc

8th Jan '09

It is an good time to reconsider the agricultural commodities and wheat in particular. After years of prices falling, in real terms, the turn up in April of the year 7 was a crucially important signal for farmers to lift investment, which had also been falling for years, and raise output.

Farmers, by spring 2008, were happily enjoying the return to the promised land! It was not to be; increased planting and a very benign growing season in the northern hemisphere gave record harvests; combined with the universal sell off in stocks and commodities this led to a collapse in grain prices to not much above where they were 3 years before.

There has now been time for reflection; wheat stocks even after this massive harvest are still at their third ever lowest level, there's talk of droughts in parts of S America and Australia and of course the number of people eating at the world's table continues its inexorable rise.

The grains charts are beginning to look encouraging and the Coppock for Wheat may be about to turn up while under zero; a rare and very bullish indicator.

For those of us who continued to eat two slices of toast for breakfast, it was never quite obvious why wheat should be driven down with the price of copper and iron ore. It's always dangerous to fall in love with your own positions (and thinking) but the betting looks as though the softs and grains may this time lead a recovery in commodities in general. Grains, remember, never enjoyed the giddy gains that metals and energy made in the last 10 years.

For agricultural shares this could be good news for companies like the Potash Corporation of Canada and Johne Deere but despite being way down from their highs both of these have bounced far off their lows and are due for a correction.

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About the Author

Rpcroft

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