| Weather Concerns Drive Market |
| Written by Kelvin Heppner | |
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A harvested field of winter wheat near Altona Despite the run-up in wheat futures over the last few weeks, the fundamentals in the wheat market remain somewhat bearish according to a market analyst with the Canadian Wheat Board. "We've had a significant weather event in western Canada," says Neil Townsend, explaining why markets have moved higher. "And the second thing, very dry, severe drought in the wheat areas of Russia and Kazahkstan, which has been detrimental to their crop." However, supplies in the U.S. remain at cumbersome levels and the U.S. crop is looking great. "We're looking at 5 million less acres than last year but when all is said and done, their total wheat production looks like it's going to be equal to last year," he says. Townsend says growers should consider the risk in the market right now. He explains weather-driven markets tend to lose ground as harvest approaches and the weather risk is removed from the market. On top of that, all three futures markets for wheat are located in the U.S. where production is slated to reach historically high levels. On the flip side, Townsend says prices could move higher if we see an unexpected increase in demand. "The one thing that we haven't seen yet that usually confirms a bull market is incremental or unexpected demand...wheat demand has been a regular this year. We're looking for something that will really spark the demand side of things." |
