Wheat price falls to lowest level in a decade


Commodity goes below $4 a bushel for first time since 2006 as good weather helps yield bumper crop.

The price of wheat has crashed to the lowest level in a decade as huge harvests pile up in big growers from Russia to the US, cutting the cost of staple foods around the world.

Extensive planting and benign weather have forced analysts to repeatedly raise crop outlooks. The International Grains Council last week increased its global wheat production forecast to a record 743m tonnes, up 1 per cent from last year.

Mounting supplies have exacerbated a broad washout in commodity markets and heaped pressure on farm economies. At about 220m hectares, wheat fields cover more land than any other grain.

Benchmark soft winter wheat futures on Friday fell 4.4 per cent to $3.83½ a bushel in Chicago, the weakest price since September 2006. Wheat prices are down 71 per cent since 2008, when the most commonly consumed food grain leapt above $13 a bushel and riots swept the streets of some emerging countries.

“The world can source wheat from the northern hemisphere or southern, eastern or western. That increases the food security of the world a whole heck of a lot,” said Ken Stein, co-manager of Kottke Commodity Capital in Chicago.

The recent US winter wheat harvest was 45m tonnes, up 21 per cent from 2015, according to the US Department of Agriculture. Merchants who have run out of room in silos are piling wheat outdoors.

Storage concerns are also growing in Russia, which is this year set to become the largest wheat exporter after hauling in more than 70m tonnes. In Canada, the government anticipates the second-largest wheat crop in 25 years, of 30.5m tonnes. Australia’s imminent wheat harvest is forecast at 26.5m tonnes, the most in five years.

The only big producer to see a large shortfall this year is France, where heavy rains damaged the crop.

Abdolreza Abbassian, grains economist at the UN Food and Agriculture Organisation in Rome, said: “A lot of countries this year will get lots of wheat regardless of what is happening in France or a few other places where the situation has been difficult.”

The average person eats 67kg of wheat each year, FAO figures show, though diets vary widely. Wheat is also fed to animals and used as ethanol feedstock.

Low prices do little to stimulate demand, which tends to track population growth, Mr Abbassian said. Wheat production is estimated to outpace consumption by about 10m tonnes this year, further inflating global grain stocks.

The quality of the impending wheat crop is uneven. Rain that allowed lush yields also made fields more susceptible to pests and disease, said Amy Reynolds, economist at the London-based International Grains Council. Minneapolis spring wheat — a benchmark for high-quality milling wheat ground into bread flour — has declined less than the soft Chicago variety used in crackers and cookies.

“The big question mark at the moment is whether or not there are ample supplies of good enough quality in the world,” she said.

US Wheat Associates, a Washington-based export promotion body, argued that supplies of high-quality wheat were less than met the eye.

“While total supply gets the most attention, wheat’s real value is as a functional food ingredient, not as a bulk commodity,” it said in a newsletter. “When you dig a bit deeper, the total supply of milling quality wheat is much different — and it is tightening.”



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