Wheat Prices Rebound on Bargain Hunting, USDA Reports Excess

Wheat futures bounced back on bargain hunting ahead of this week’s opening despite the USDA indicating a surplus.

US wheat futures for December delivery rose by 1.74% to $5.50 per bushel at the market open on October 02. Similarly, Chicago Board of Trade (CBOT) wheat gained 0.50% to $5.44 a bushel.

The grain commodity finished last week down 6.44% at $5.41 per bushel, marking a three-year low. Year-to-date, the worldwide staple has recorded its fourth straight quarterly price deterioration, its most prolonged decline in 14 years.

Increased rains late in the growing season led to a higher yield for spring wheat varieties. However, water levels in a vital stretch of the Mississippi River fell close to the lowest readings, slowing down hauling.

Slower transport coupled with high inflation made storing grains more expensive than usual. As a result, producers needed to eliminate their inventories even at the cost of lower profits.

With farmers choosing to sell rather than hold, large speculators have increased their net short position in CBOT wheat. According to the Commodity Futures Trading Commission (CFTC), even noncommercial traders have raised their negative holdings of the cereal crop.

Another challenge facing US wheat producers and distributors is the anticipated short-term excess supply both locally and globally.

USDA Grains Update Shows Wheat Surplus

The US Department of Agriculture (USDA) stated that the nation’s wheat harvest is at 1.81 billion bushels, 4.50% higher than previously assessed. A separate report estimated US wheat stocks at 1.78 billion bushels as of September 01, 0.11% higher year-over-year.

Ample Russian supplies and unexpected exports from Ukraine further increased the pressure on cereal grain prices. Poor export demand for the crop threatens to keep prices low ahead of the US grain export season.

In contrast, helping narrow global grain supplies is the predicted poor wheat harvest in India, the world’s largest rice exporter. According to the India Meteorological Department (IMD), rainfall in the third quarter was 6.00% below expectations, the lowest since 2018.