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Global Supply Glut Sends Wheat Plunging 2%

April 20, 2017 at 17:04 by Andrew Moran

Wheat futures are trading lower on Friday as the market is being weighed by higher global supplies. Due to a mounting supply glut, wheat prices have been trading in negative territory for much of the year. The only trend that the commodity is benefiting from is a weaker US dollar.

May wheat futures tumbled $0.075, or 1.79%, to $4.1150 per bushel at 16:35 GMT on Thursday on the Chicago Board of Trade (CBoT). Despite starting off 2017 strong, wheat prices have been plunging since the end of February. Year-to-date, wheat is down close to 3%.

Investors are concerned about growing wheat supplies in the international market. US wheat exports for the 2016 season appear to be strong, while exports are larger in Europe and China. It is being reported that output may be lower in the Black Sea region, a trend that may alleviate the supply glut. The wheat crop in Russia and Ukraine are projected to decrease by roughly 9% to 66 million tonnes.

Traders are now turning their attention to weather worries in Europe. Crops are ostensibly facing spring frosts in addition to a recent spell of dryness.

Wheat prices are being supported by a falling US dollar. The greenback shed 0.19% on Thursday, falling to a four-month low. A cheaper US dollar makes commodities cheaper for foreign investors to purchase. Commonwealth Bank of Australia analyst Tobin Gorey warned that a firmer dollar has been “eating into US competitiveness against almost every other major competitor with the exception of the European Union.”

Corn is also dipping on Thursday. May corn futures declined $0.0275, or 0.76%, to $3.59 per bushel. Year-to-date, corn has traded relatively flat, advancing a tepid 0.49%. Corn made headlines when the Brazilian government announced this week that it would be offering up to $159 million in subsidies to assist corn producers in selling their immense crop in the 2016/2017 cycle.

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