Wheat Falls 2% on Global Production, US Export Slump

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Wheat futures tumbled as much as 3% to start the trading week, driven by ample international output and slumping US exports. Although wheat enjoyed an increase in July, prices remain in the red this year. With many major producers anticipating a better harvest in the coming marketing season, will crop prices test $5 in the second half of 2020?

September wheat futures tumbled $0.1375, or 2.59%, to $5.175 per bushel at 16:30 GMT on Monday on the Chicago Board of Trade (CBoT). Wheat is coming off a 1.7% weekly loss, but it did surge nearly 5% last month. Year-to-date, wheat has slumped 7.5%.

Investors have turned bearish on wheat due to booming global production. Many of the world’s top wheat markets are forecasting improving yields and rising output estimates. In Russia, for example, private projections show output hovering around 80 million metric tons, which is nearly in line with government expectations. But farmers are still expecting higher prices since exports need to source at a farther distance.

Market observers are homing in on several key markets in the coming months: Argentina, Australia, Egypt, and Ukraine.

These trends, however, are casting a bleak shadow for US agriculture. As American wheat shipments fall, there are concerns that foreign producers will overtake the US market. With Russia increasing production, Australia forecasting better weather conditions, and Ukraine’s wheat harvest at 72% completion, it is believed that US farmers will fall behind their competitors over the next 12 months.

That said, US Department of Agriculture (USDA) data suggest export sales have remained solid in the last two weeks, shipping 677,000 metric tons. This was supported by a slumping US dollar – the greenback has cratered 6% over the last three months. In the last week, US wheat inspections slipped to 500,000 metric tons. This is an important metric because it can suggest how exports are performing.

In other agricultural commodities, September corn futures were unchanged at $3.16 per pound. September soybean futures tacked on $0.02, or 0.2%, to $8.9425 per bushel. September coffee futures dipped $0.0085, or 0.71%, to $1.181 per pound.

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