Wheat futures are soaring to close out the trading week as investors are going all in on the agricultural commodity. The reason? Global wheat inventories are tightening, which could lead to an escalating international deficit. Could wheat prices touch $8 this month?
December wheat futures surged $0.2475, or 3.41%, to $7.5025 per bushel at 16:28 GMT on Friday on the Chicago Board of Trade (CBoT). Wheat prices will post a weekly rally of 4.5%, lifting their year-to-date increase to more than 17%.
According to new data from the US Department of Agriculture (USDA), global wheat stockpiles are dissipating, with the planet sitting on the lowest level of inventories since 2012. Although China and India are in possession of vast grain supplies, the rest of the world is going through a wheat supply shock.
Andrew Whitelaw, Commodity Market Insights, recently pointed out in a research note:
“The world’s exporters are forecast to have end stocks of 53.1 million metric tonne.
This is on a par with 2012, but is the lowest since 2007.
This shows that the world is quite tight when it comes to available stocks at the end of this year.
If there are any major production issues in the coming season, the stage is quite well set for a strong performance.”
Meanwhile, the USDA lowered its wheat estimates in its latest Small Grains 2021 Summary, forecasting that the 2021 US all-wheat crop will come in at 1.646 billion bushels, down 51.041 million bushels from the previous forecast in August. This is also down roughly 10% last year’s projections.
“Area harvested for grain totaled 37.2 million acres, up 1% from the previous year. The US yield was estimated at 44.3 bushels per acre, down 5.4 bushels from the previous year,” the USDA wrote.
Looking ahead, even production is expected to be lower than originally anticipated. The USDA believes that both winter wheat and spring wheat will be 44% below last year’s outlook.
That said, new European Commission data show that soft wheat exports have been sharply higher in the 2021-2022 marketing year, rising 36% to 6.95 million tons from July 1 to September 26.
In other agricultural commodities, December corn futures tacked on $0.0375, or 0.7%, to $5.405 per bushel. December soybean futures shed $0.0625, or 0.5%, to $12.4975 a bushel. Coffee edged up $0.0015, or 0.07%, to $2.042 per pound.